Gov McAuliffe Announces Amendments to FY15-16 Budget

This morning in Richmond, Governor Terry McAuliffe introduced his amendments to the current fiscal years 2015 and 2016 biennial budget.

As you remember, falling revenues lead to a biennial shortfall of $2.4 billion. Over the course of the last year, including unscheduled spring and fall budget actions, the Governor and General Assembly have addressed a large portion of that shortfall. However, an additional $882 million still needed to be addressed.

McAuliffe again proposes to expand Medicaid in accordance with the Affordable Care Act. However, projected state savings from the enactment of Medicaid Expansion are directed to the Commonwealth’s Rainy Day fund, i.e. they do not support proposed expenditures.

McAuliffe’s amendments can be categorized into four steps:

First, he identified a total of $954.7 million in savings, $72.5 million over the shortfall left to be addressed;

Second, he made technical adjustments leaving a balance of $67 million for new spending requirements;

Third, he identified $176.6 million in new spending; and

Fourth, he identified $114.3 million in new revenues by proposing increases to specific tax preferences.

These four actions leave an unappropriated balance of $7.6 million.

70 percent of McAuliffe’s revenue increases come from two sources, $57.8 million is generated by reducing the Accelerated Sales Tax threshold from $26 million to $2.5 million (retailers make an expedited transfer of their June sales tax receipts), and $22.4 million is generated by capping the maximum amount individuals can gain from the Land Preservation Tax Credit.

McAuliffe outlined six themes for his spending strategies:

· Invest in opportunities to grow a new economy;
· Hold public education expenditures constant – no reductions;
· Protect investments in higher education – no new reductions – and offer small increases in key areas;
· Provide adequate funding for core Health and Human Resources services;
· Support priority needs in public safety and for veterans; and
· Protect transportation funding.

Almost two thirds of the Governor’s new spending comes from ten proposed items. They include, increased health insurance costs for state inmates, proposed additional funding for the Governor’s Economic Development Opportunity Fund, mandated funding to house inmates in jails, and increased funding for the state’s intellectual disability and mental health facilities.

The General Assembly convenes its 2015 regular General Assembly Session on Wednesday January 14th. The legislature will act on the Governor’s budget proposals (bill). Kemper Consulting expects the chambers’ respective budget committees to release their suggested budget amendments on Sunday, February 8th.

We will continue reaching out to you on an individual basis as we find budget items of particular interest. As always, please let any of us know if you have any questions.