Sept. 15, 2014 Virginia Budget Agreement

Earlier today in Richmond, Governor Terry McAuliffe and senior legislators, including the House Republican leadership, announced a budget agreement that will be considered later this week when the House and Senate reconvene in special session. Until today, the General Assembly had intended to address only the issue of Medicaid expansion during Thursday’s special session. The details of the budget agreement may be released as soon as tomorrow when the House Appropriations Committee intends to act on the legislation encompassing the plan.

The agreement appears to finalize reductions for the current fiscal year (FY 2015) and begins to address necessary reductions in the second year of the current biennial budget (FY 2016). The preliminary outline of today’s plan:

· Rainy Day or reserve fund transfers: Agreement on additional withdraws for both years – $470 million in FY 2015 and $235 million in FY 2016;

· Public Education (K-12): Seeks to protect from additional reductions;

· Higher Education and Local Government: Reductions are lessened compared to additional state agency cuts of apparently 5 percent in FY 2015 and 7 percent in FY 2016 (the Governor’s Office notes FY 2015 Higher Education reductions of 3.3 percent);

· Governor McAuliffe’s A Heathy Virginia plan announced last week intended to expand healthcare services to over 200,000 Virginians: Seeks to protect associated new funding for the plan; and

· Additional FY 2016 reductions of more than $270 million (in addition to those announced today): The Governor and General Assembly will address during the 2015 regular legislative session.

The Governor and legislative leaders, including House Speaker Bill Howell, Delegate Chris Jones, Chairman of the House Appropriations Committee, and Senator Chuck Colgan, Chairman Emeritus of the Senate Finance Committee, hailed the agreement as including structural reforms (i.e. not only one time budget cuts), intended to protect the Commonwealth’s AAA Wall Street bond ratings. Delegates Kirk Cox, House Majority Leader, and Steve Landes, Vice Chairman of the House Appropriations Committee, stood with the Governor at his news conference.

In August, Governor McAuliffe projected additional state general fund shortfalls of more than $345 million in FY 2015 and more than $535 million in FY 2016. These reductions are in addition to the $1.5 billion shortfall forecasted and addressed in the adopted 2014-16 biennial budget. Soon after the announcement of the new shortfalls in August, the Governor asked state agencies to prepare 5 percent reduction plans for FY 2015 and 7 percent reduction plans for FY 2016. State agencies and institutions of higher education are in the process of submitting their reduction plans to the Governor.