Virginia@: September 2020

Tuesday, September 29, 2020

Jefferson Journal: House Budget Offers Utility Relief, Added Unemployment checks

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The Jefferson Journal

House Budget Offers Utility Bill Relief,

Added Unemployment Checks

By Stephen D. Haner

Virginia's House of Delegates has proposed spending $120 million from federal COVID-19 relief funds to help at least some Virginia families catch up on their utility bills and wants to pump $210 million from the same source into the state's unemployment insurance program.

Both ideas surfaced when the House Appropriations Committee approved a set of budget amendments September 25 (more details here). Neither idea is matched in the Senate Finance and Appropriations Committee amendments, also revealed Friday and summarized here. That $330 million in COVID assistance for individuals is a serious difference of opinion to be resolved in the coming conference process.

The General Assembly so far is following Governor Ralph Northam's advice to show restraint on state spending in the midst of the COVID-19 recession. Neither the House nor the Senate are proposing to raid state reserves to restore spending priorities frozen during the emergency. Neither is looking to increase any tax rates.

However, both have plenty of ideas for spending the $1.3 billion in unallocated federal COVID funds provided to Virginia. And both combed through the budget looking for places to cut or unnoticed revenues, creating available money to be spent on their own priorities.

For example, the recent announcement that Rolls Royce would be closing its Prince George County factory means it will not be receiving scheduled incentive payments. ABC store profits are up. The state's employee health insurance program is running surpluses, allowing a premium holiday. Overall, the House "found" $160 million to divert to other uses and the Senate more than $217 million. When they compare notes, the final total may be higher.

Adjusting the state budget was the major reason for calling the special session which started August 18, but the process has taken a ridiculous amount of time. There remain other substantial disagreements between the House and Senate amendments, on both revenue and spending. No one can say when the competing spending plans will be reconciled for a final vote.

Then the process starts again in January.

The bulk of the more than $2 billion in new spending, approved in March and then frozen in the recession, remains off the table. But Virginia's $137 billion two-year budget has not been cut in response to the recession. Planned growth has merely stalled.

The special session has defeated any and all efforts to reign in the Governor's authority to issue open-ended emergency executive orders, or to require legislative oversight after the fact. But the House money committee seeks to prevent him from spending any future federal COVID money without consulting the legislature. Some legislative prerogatives are sacred.

The $120 million for unpaid utility bills would be distributed through an application process at the State Corporation Commission, and the payments will be made directly to utilities. Priority will be given to accounts 60 days or more behind, then shorter periods. How far $120 million will go, and to how many accounts, is unknown. It will not solve the problem.

While they disagree on this funding, the House and Senate proposals are identical in another provision dealing with unpaid utility bills, a sign the utility lobbyists have done their jobs. Their budgets both pick up on the proposal to allow utilities to be compensated for unpaid accounts by charging all ratepayers a special rate adjustment clause. The utility disconnection moratorium will continue through and perhaps 60 days beyond the official emergency period.

The House also proposes to commit $210 million of federal relief funds to the unemployment insurance program. The funds could be used to provide the current $300 per week enhanced benefit a while longer, or to reduce the deficit in the strained unemployment trust fund. Spending it that way reduces the future UI tax increases on Virginia's employers, but it is more likely to be (and is better) spent on enhanced weekly benefits.

As expected, the budgets both deal with the on-going restrictions on evictions and foreclosures, extending those deadlines as well. The language both sides adopted tries to coordinate Virginia's rules with the current Centers for Disease Control ban on certain evictions, and once that expires state-level rules apply. They also added $25 million more to the fund being used to help individual tenants who have fallen behind.

Both budgets also focus on protecting the financial supports for Virginia's public schools, which are finding that staying closed and operating virtually, or trying to give teachers and students either choice, are not less expensive options. The House also proposes $80 million from general funds and $118 million from COVID relief funds to aid higher education's response to the pandemic.

While the House directed money to unpaid utility bills, unpaid rents and sought to bolster unemployment payments, the Senate set higher priorities on bolstering functions of government. It also restores funding in areas far from the pandemic emergency, with lists of small items that look like the member requests for favored projects that dot a normal budget. This is not a normal time.

Both committees bow to uncertainty in their proposals, not quibbling with Governor Northam's underlying cautious revenue projections. How badly are the universities suffering financially? How many unemployed or underemployed Virginians will eventually find their way to the Medicaid rolls? Will virus cases spike again in the fall and winter, further damaging the economy? Perhaps things will be clearer when another set of budget adjustments is considered in January and February.

(Both sets of amendments are now also posted on the Legislative Information System's budget webpages. Use this source when looking for the wording on language amendments.)

Stephen D. Haner is Senior Fellow for State and Local Tax Policy at the Thomas Jefferson Institute for Public Policy. He may be reached at steve@thomasjeffersoninst.org.

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