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RICHMOND—Governor Ralph Northam today presented his budget for Fiscal Years 2020–2022 to the Joint Money Committees of the General Assembly. His proposed budget is the most progressive in Virginia’s history, and makes significant investments in key priorities while maintaining strict fiscal responsibility.
Ahead of his address, Governor Northam previewed budget proposals to invest in K-12 education, address housing affordability, make tuition-free community college available to low- and middle-income students who pursue jobs in high-demand fields, protect Virginia’s environment, transform the Commonwealth’s early childhood education system, and combat maternal and infant mortality.
Governor Northam’s proposal also brings Virginia’s total reserve funding to $1.9 billion, over 8 percent of the total budget. This is more than Virginia has had in reserve funds at any time in history, and meets the aggressive goal Governor Northam laid out at the start of his administration, two years early.
AS PREPARED FOR DELIVERY:
Good morning. I hope that you are all doing well. Thank you for the opportunity to speak with you this morning.
Chairman Jones, Chairman Norment, Chairman Hanger, Chairman Ware, Speaker Cox;
Chairman-elect Torian, Chairwoman-elect Howell, Chairwoman-elect Watts, Speaker-designee Filler-Corn, and other members of the General Assembly:
And to my wife, First Lady Pam Northam; Lt. Gov. Justin Fairfax; Attorney General Mark Herring; and members of our Cabinet, thanks for your service to Virginia, and thank you for being here today.
I want to thank Secretary of Finance Aubrey Layne and his team, as well as the staff at the Department of Planning and Budget and the Department of Taxation, for all their work to develop this budget.
We gather here today at a time of change for the General Assembly. New leadership and a new majority are coming in January.
I want to take this moment to thank the outgoing leadership of these committees. We have had differences, on policy and politics, and I suspect we will continue to do so.
But I have never doubted that you did your work with the best interests of Virginians at heart. Fiscal responsibility is not a partisan issue.
As we move forward together developing this new budget, I hope we all keep our financial responsibilities to the Commonwealth in mind.
This year, CNBC named Virginia the best state in which to do business. They did that because we have worked together to diversify our economy, invest in our workforce and infrastructure, and keep a stable and open business climate.
My administration has focused on helping bring new jobs and new business to every region of Virginia.
In my first two years as governor, we have had $26 billion in new economic investments—a record amount, and more than any previous administration announced during a full term.
That is something that we can all take credit for, and a record that we can all be proud of.
We have invested in our tech talent pipeline. Just last month I signed agreements with 11 Virginia universities to ensure they will graduate 31,000 more computer science degrees in the coming years.
We’ll need them to keep pace with our growing tech industry.
We are working to make sure that Virginia’s economy continues to grow and create new jobs.
As I mentioned when I spoke to you in August, we start this budget from a good, stable place.
We have worked together to protect our AAA bond rating and build up our reserves.
In fact, I’m proud to announce that this budget puts an additional $300 million dollars into our reserve funds.
When I came into office, we were on a credit watch, and had only $283 million in reserves. One of the rating agencies noted that low balance as part of the reason for the credit watch.
I met with them in New York, and I set a goal of putting aside 8 percent of our revenues into reserves by the end of my term.
This budget will exceed that goal and do it ahead of schedule, bringing our reserve balance to approximately $1.9 billion—more than 8 percent. This will be the most Virginia has had in reserve funds at any previous point in our history.
This is an important step to ensure that Virginia can weather whatever storms our volatile national and global economy throws our way.
Working together over the past two years, we have laid the foundation for a strong, forward-looking budget.
This spending plan makes generational investments in areas that have been underfunded for years, and ensures that we take care of our most vulnerable Virginians.
The budget I present to you today is structurally balanced. And it is cautious—we are forecasting our revenue to grow around 4 percent each year over the biennium, which is a more conservative forecast than the two General Assembly budget committees.
This strong economy enables us to increase funding in areas that have been neglected, while better positioning Virginia for the future.
For example, as we face the threats created by climate change, it is critical that we protect our environment, improve our ability to withstand new climate forces, and expand renewable energy sources.
So this budget includes $733 million in new funding for natural resources priorities, including $500 million in capital investments.
Chief among these priorities is our commitment to a clean Chesapeake Bay by 2025. We have already laid out a plan to reach this goal, but it requires investment in water quality, so our efforts aren’t set back by continued nutrient runoff issues.
My budget includes $400 million for water quality projects and programs, so we can lead our neighboring states in the important work of leaving a clean Bay for our children and grandchildren.
To further protect our environment, I am proposing to add $15.5 million annually for the Virginia Land Conservation Foundation grant program, bringing it up to $20 million each year.
Through these grants, our ConserveVirginia initiative can help preserve the natural beauty we all value.
Emerging renewable energy resources hold great possibilities, for our environment and for our economy.
For example, offshore wind holds enormous potential, not just in creating that wind energy, but in the supply chain manufacturing needed to support this industry.
We have the opportunity now to establish Virginia as the Eastern seaboard’s leader in the offshore wind industry, attracting thousands of well-paid jobs, and diversifying the economy of Hampton Roads and of Virginia.
To support this goal, we’ll set aside up to $40 million that we can invest in infrastructure improvements at the Port of Virginia, to accommodate offshore wind supply chain needs.
To coordinate these efforts, this budget establishes an Office of Offshore Wind, to work with partners and make sure that Virginia is a key player in this growing energy resource.
To ensure that we reduce carbon pollution, my budget removes the language that’s holding Virginia back from joining the Regional Greenhouse Gas Initiative.
And I’m proposing $25 million to ensure that DEQ has the resources it needs to do the job of efficiently monitoring compliance with complex environmental regulations, and an additional $2.7 million for environmental justice and community outreach each year.
Smart investments now lay the groundwork for the future.
In my last budget, we invested $19 million a year to extend broadband access to communities that lack it. In the 21st century, broadband is a requirement for opportunity, for education, for healthcare, and for everyday life.
In this budget, we’ll add another $16 million a year on top of that, to invest $35 million each year to get more communities connected.
But perhaps the smartest investment we can make is in our children and their education.
That’s why this budget allocates an additional $1.2 billion for our schools and educators—one of the largest investments we have ever made to educate children from early childhood through their senior year.
Every child in the Commonwealth should have access to a world-class education. To help make that happen, Virginia must be able to attract and retain the best teaching talent.
In the last budget, we were all proud to give our teachers the largest single-year pay raise in 15 years.
But we can do more. This budget allocates $145 million to give teachers and support staff a three-percent pay raise, effective July 1, 2021.
Raising teacher pay is one step toward securing the quality of our K-12 education system for years to come.
Our children come to school with the burdens of everything else in their lives.
When that includes conflict at home, or at school, it’s critical that our schools have trained staff that students in distress can turn to.
Counselors can also help guide students toward the career paths that are right for them.
Last year we took the first step toward our shared goal of putting more counselors in our schools. This budget gets us the rest of the way toward this goal, allocating an additional $99.3 million to hire more counselors.
We will also invest an additional $808.5 million over two years to fund rebenchmarking for our K-12 schools. This is critical to ensure that our schools, and school funding, keep pace with our students’ needs, so every child receives a quality education.
Our schools rely on our state and local governments to fund them, but we in turn rely in part on the Virginia Lottery, which has for decades provided a funding stream for our schools.
But technology moves fast, and in just the last year we have seen a sharp rise in electronic games of skill. As these machines become more popular, our lottery sales have dropped.
That takes money away from our schools, and that is not acceptable to me.
We’ll impose a tax on these games of skill, and earmark that revenue to boost funding for our public school students.
I am proposing to use the revenue from regulating these games to create a new flexible, per pupil pot of money distributed to our school divisions based on enrollment so that they can use these funds in a manner that best supports their needs.
This new revenue will also free up current Lottery revenue so that it may be directed to school divisions with a high concentration of children living in poverty.
This budget increases the at-risk add-on by 50 percent—a $140 million investment. That is more than we have ever been able to devote to our high-poverty school divisions.
This money will help school divisions offer additional support, such as dropout prevention programs, after-school programs, and specialized instruction.
Every child, no matter who they are or where they live, should get a world-class education in Virginia.
This investment will ensure that from Petersburg to Bristol, our school divisions with high percentages of at-risk students are able to help the children who need it most.
Before those at-risk children ever get to a K-12 school, they can benefit from early childhood education programs.
The disparities between children who have all the advantages, and the children who don’t, become apparent early on.
But we know many of our at-risk young children aren’t enrolled in early childhood education programs.
To better address these disparities from the start, we will invest nearly $95 million in new funding for our early childhood education system.
This will allow more at-risk four-year-olds and three-year-olds to access these programs, and will establish accountability standards and ensure educators have the training and support they need.
We want to make sure our early childhood programs work for every family and every child.
I want to thank the First Lady and the Children’s Cabinet for their work on these issues. They have engaged a large and diverse group of stakeholders, and done a great deal of work to bring people together to truly invest in our children.
As we invest in our youngest learners, we must also invest in the older ones—those seeking higher education or skills training.
We want every Virginian to have access to a world-class, quality education.
But for many Virginians, an advanced degree or job training is financially out of reach.
Yet our employers increasingly need workers with training or degrees in high-tech fields.
I have spoken frequently about boosting our workforce training pipeline, particularly at our community colleges.
And I held a series of listening sessions in every region of the state earlier this year, to hear from everyone from students to businesses about what they really need.
As a result, we have crafted what we call the G3 program—Get Skilled, Get a Job, and Give Back. It’s a plan to make sure that the folks who are trying to make ends meet can afford to get the training they need for better jobs.
This budget sets aside $72.5 million each year for G3, to provide tuition assistance for low and moderate income students.
This investment will increase access by offering last dollar funding to eligible students to pay for tuition, fees, and textbooks.
Additionally, we must recognize that there are financial challenges beyond tuition and fees that stand as a barrier to our lowest income students.
When you’re struggling to pay for the basic necessities of life—a roof over your head, food, childcare, transportation—the cost of an education can seem far out of reach.
Many of these students have to work more than one job just to make ends meet.
Under G3, students who receive full Pell grants and who enroll in classes full-time will receive additional support to help them overcome these barriers, and put them in a position to succeed.
To get these grants, students will have to enroll in one of five key pathways: technology, health care, public safety, early childhood education, and the skilled trades.
In exchange, we ask these students to perform community service for every credit hour they take each semester.
In this way, we can help ensure that we have the trained workforce we need for some of our most high-demand jobs, while helping make training for these jobs more affordable.
G3 is focused on specific career pathways. But we want to make higher education more accessible to students in all fields.
My budget includes $45.4 million to increase funding for need-based financial aid for Virginia undergraduate students at our public colleges and universities.
For those at private institutions, we’re raising the annual amount of our Tuition Assistance Grants to $4,000 per student. We will focus those grants on students attending brick-and-mortar classes.
To ensure that our public institutions have the resources they need for new or renovated classrooms and other buildings, this budget includes $895 million in capital funding for our colleges and universities.
A portion of that capital funding will go to historically black colleges and universities in Virginia, which have been underfunded for far too long.
We are also allocating funds to help HBCUs provide additional support to their students. Many of our HBCUs attract students from the first generation in their families to attend college.
Those students often need additional guidance and support, no matter what school they attend, and our budget includes funding for support programs to help overcome barriers that can prevent students from graduating.
I’m excited that this budget includes the state share for a public-private partnership, U-Teach, at Virginia State University and Norfolk State University, to encourage more students of color to become STEM educators.
This year we commemorated the 400th anniversary of the founding of representative democracy on these shores, as well as the arrival of enslaved Africans here.
It has been a reminder that our history is complex and difficult. In our nation and in our Commonwealth, liberty and enslavement were born at the same time.
As we have struggled with how we can best tell the full and true story of our history, it has become clear that we can and must do a better job of ensuring that everyone learns and understands that story.
So my budget includes additional funding for a number of museums, cultural sites, and highway markers that help to better tell the story of African-Americans in Virginia.
Black history is American history, but in the past, there has been little state support for the institutions that preserve and teach that history.
We aim to rectify that, and encourage our students to visit our historical sites to learn more about our shared history.
We will also fund our new Director of Diversity, Equity, and Inclusion, so that she has the staff she needs to do this critical work.
To begin to address long-standing health inequities, we have allocated funds to hire additional staff at the Office of Health Equity, provide adult sickle cell services, and provide staff in four high-need health districts for community health pilot programs.
We know that black mothers are twice as likely to die postpartum as white mothers are, which is why we will work to eliminate disparities in maternal and infant mortality.
We will propose greater funding for home visiting programs, and make sure that new mothers who are eligible for Medicaid have access to care for a year after their child is born.
My budget allocates $12.8 million in general funds for home visiting services, and $3.2 million to extend health coverage for new mothers.
We will also study how Medicaid could appropriately cover doula services.
Community doula programs support women both during pregnancy and post-partum, and can reduce maternal mortality, particularly among women of color.
A good education, healthy children and families, and access to economic opportunities all rely on the ability to find, and afford, a safe place to live.
We know that having affordable, accessible housing helps attract jobs, builds robust communities, and ensures that everyone has a safe and stable place to live.
I’m proposing to put an additional $63 million into our Housing Trust Fund, which works to increase affordable housing and helps reduce homelessness. That brings the total in the fund to $84 million, an unprecedented level.
We’re also allocating money for a pilot program to help reduce evictions, and to increase permanent supportive housing for people with behavioral health issues or developmental disabilities who need that assistance.
I said this budget makes investments in areas that we have neglected. I also said it will help us take care of the most vulnerable Virginians when they need us the most.
Our mental health system falls into both of these categories.
It is our duty as a state to care for our most vulnerable citizens. That means we must care for people who are having mental health crises.
The bed of last resort legislation, passed in 2014, rightly recognized that we never want to turn a person in crisis away from mental health treatment.
When a person in crisis is under a temporary detention order, a state hospital must take them in.
But the unanticipated consequence has been that our state mental health hospitals are regularly running over capacity. Their beds are full.
Our mental health system relies on a good-faith effort between our public and private providers, and we must all work together to ensure that Virginians get the care they need—especially when they need it most.
That’s what we would want if our child, sibling, or spouse, was in crisis.
We know that many mental health crises can be averted if the patient has access to regular treatment in the community, before things get to a crisis point.
To increase that capacity to provide treatment, we are investing more dollars in our community services boards and the services they provide through the STEP-Virginia program. This budget continues that investment.
All told, we’ll put $177 million into our community-based services. That includes more than $64 million from the general fund to continue implementing STEP-Virginia, but at a more measured pace than originally planned.
This is consistent with recommendations from JLARC, and recognizes that our community services boards need time to build the capacity to provide these services.
The funding will help them provide more outpatient treatment, comprehensive crisis services, care for military service members and veterans, and peer support.
Health care costs are rising across the board. As a physician, I’m committed to finding ways to reduce those costs on Virginia families, and ensuring that everyone has access to meaningful, affordable coverage.
When the Affordable Care Act was enacted, states had a choice between setting up their own health insurance marketplace, or using the federal one. At that time, Virginia chose to participate in the federal marketplace.
But as the protections of the ACA have been eroded by the current administration, states with their own marketplace are better able to keep premiums low.
We think Virginia can do this better.
So this budget sets up a state-based marketplace for the nearly 400,000 Virginians who buy health insurance on their own, rather than through an employer.
Insurance companies already pay user fees to the federal government for the marketplace. We’ll use those fees from Virginia companies, which means we can increase affordable coverage in a fiscally responsible way.
We also know that insurance premiums in those marketplace programs are much higher than they were just a few years ago—in large part because the federal government has rolled back programs that helped keep premiums low.
We’re going to help reduce those marketplace premiums by 20 percent through a state reinsurance program that will help keep premiums stable.
Reinsurance is a pool of money that helps insurers cover high-need people. The ACA included a reinsurance program, but that has expired.
We’ll pay for this by increasing our cigarette tax, currently the second-lowest in the nation, by 30 cents a pack.
Raising this tax at this level will still put us at a lower state rate than every neighbor besides North Carolina, and will allow us to take important steps to control the cost of health care.
Smoking is the leading cause of preventable death in Virginia, and it directly causes more than $3 billion in yearly health costs in Virginia.
Almost $486 million of that is spent by Medicaid, which means it costs every Virginia taxpayer.
Here in Virginia, we pride ourselves on being a low-tax state. But it makes no sense to cling to the bottom of the rankings for a product that costs us so much.
I said at the beginning of this speech that this budget puts money into areas that have been underfunded.
But in some cases, programs are underfunded because their revenue sources are outdated.
That is the case with our transportation funding.
Transportation is the platform for our economy. It connects our citizens to jobs, education, and opportunity.
We have made important progress over the past two years, identifying funding for I-81 and our interstates, and for Metro.
But Virginia’s lawmakers have long struggled to find ways to pay for our roads and transit in Virginia.
We rely on motor fuels taxes for many of our transportation dollars.
But modern vehicles use less fuel, which means that revenue isn’t keeping pace with the continuing need.
In 2018, miles driven in Virginia increased, while we collected less from the gas tax. This trend is only going to escalate.
We support Virginians making environmentally friendly vehicle choices. And yet we also recognize that drivers will continue to use more and more of our system, while the system sees fewer and fewer dollars.
This is not sustainable. And if we don’t address it now, it will be harder to fix in the future.
To stabilize our transportation system, we will restructure our funding model.
First, we will eliminate vehicle safety inspections, which will save Virginians about $150 million each year.
Data show that there is no connection between highway safety and these inspections.
That’s why 35 other states don’t have them.
Second, we will cut the auto registration fee in half, saving Virginians more than $130 million per year.
And third, we will raise the gas tax 4 cents a year over three years, then tie that revenue stream to inflation.
That will ensure that those who use more of our transportation system—including out-of-state drivers—pay for it.
And it will help us adjust for the impact of fuel efficiency.
This funding proposal is more sustainable, and it is more equitable. Those who drive more should pay more.
With these changes, we can maximize our rail investments, substantially increase transit funding, and increase money spent on road maintenance from city streets to interstate highways.
We can restore funding for the Northern Virginia Transportation Authority, ensuring that combined with the I-81 bill from last year, NVTA will have $65 million more a year.
We can ensure we match federal funds for Metro, and increase the funds available for SMART SCALE.
And most importantly, we can improve the safety of our roadways.
As I mentioned at the start of my remarks, this is a time of change in the General Assembly. We will see new leadership, with new priorities.
Many of our shared priorities are reflected here in this budget. But I also know this new General Assembly will have its own vision.
In the spirit of cooperation and good faith, we have set aside $200 million, to provide the new General Assembly with the flexibility to prioritize funding needs that they identify as important.
In November, Virginia sent a clear signal about the direction they want our Commonwealth to go.
They want us to continue to build a Virginia that is welcoming and respectful of all, and a Virginia that takes care of its citizens when they need help the most.
They want us to continue building a Virginia that is prepared to withstand global and national economic changes, technological advancements, climate change, and more.
Virginians want us to move this state forward, not back. They want a state where a child is supported in school, where we prepare for climate realities, and where people can afford to see a doctor when they need to.
This budget takes care of vulnerable Virginians, invests in long-neglected needs, and puts money away for the inevitable rainy day.
It shows that we can protect our AAA bond rating and help at-risk children. We can invest in those children’s future by supporting a clean environment, and affordable education. We can teach our full history, and we can put money into reserves. None of these things has to be mutually exclusive.
We can do all of this together, and I stand ready to work with anyone who wants to make Virginia a better place. I have spoken in the past about finding common ground, working together across party lines, and acting not for ourselves but for Virginia.
I meant it then and I mean it now. We got here together, building a strong economy and a strong foundation for this budget. We can keep Virginia moving forward.
That is what this budget does, and that is what I intend to do. I hope you will join me in building a stronger and more inclusive Virginia.
Thank you, and happy holidays.
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