Pandemic could lead to a drop of $1 billion or more in expected state revenue
Virginia lawmakers passed a budget earlier this month that would give teachers and state employees raises and bonuses — a win for public sector workers who said they’d suffered too many years of stagnant pay since the Great Recession.
The total cost of the pay increases was about $600 million over the next two years, which was one of several big ticket new spending lawmakers were able to approve thanks to a stronger-than-expected economy.
Two weeks later, those pay boosts are in serious jeopardy as state officials scramble to figure out just how bad the conoravirus’ impact will be on the state budget.
The new Democratic majority at the legislature has previously promised to make increasing teacher pay a top priority. State officials said the pay raises could be cut but they were not ready to say for sure.
“That is definitely on the list but we haven’t made any decisions yet,” said Democratic Sen. Janet Howell, chairwoman of the Senate Finance Committee.
The proposed pay increases included the state’s share of a 2% a year increase for teacher pay for the next two years and a 3% bonus in fiscal 2021 and a 3% raise the following year for state employees.
Christine Melendez, a high school Spanish teacher in Chesterfield County, said she hopes lawmakers can find a way to keep those pay increases. She said losing the proposed raises would be a “slap in the face” to teachers who are currently trying to improvise new online lesson plans after Gov. Ralph Northam ordered schools closed for the school year.
Painful budget shortfalls due to the Great Recession led to several years without any across-the-board increases in public sector pay in Virginia. The average salary of $52,000 for Virginia teachers puts the state at 31st in the country, according to a recent report by the legislature. In 2010, Virginia’s average teacher pay — $45,000 — was 25th in the country.
Melendez said teachers are becoming better organized and more outspoken in search of higher pay, and efforts to cut the proposed raises will be met with pushback.
“We can only take so much,” she said.
Northam will likely make significant changes to the proposed budget before it goes to lawmakers for a final vote. The legislature is set to reconvene in late April, though that may be altered because of the virus.
Secretary of Finance Aubrey Layne recently told lawmakers to brace for at least $1 billion in fewer revenues in the next fiscal year than the state had been expecting, but said the real amount could be much more. He and other state officials said there are just too many uncertainties around the coronovirus’ impact, including what help the federal government will ultimately provide, to make accurate predictions about what the damage will be and where the budget will have to be slashed.
“There’s going to be big cuts, I just don’t know how much. I really don’t,” Layne said.
Virginia’s unemployment numbers have spiked as the state has ordered restaurants and other businesses to close or severely limit their operations for at least a month.
Tax revenues of all kind are certain to take a hit, including individual income taxes, which make up about 70% of the state’s general fund revenues. Meanwhile, the cost of social services, like Medicaid, will rise as more people turn to the state for help.
A booming stock market had boosted state tax revenues and helped give lawmakers plenty of new money to spend during the most recent budget writing process. New spending that lawmakers will have to reconsider includes $80 million to freeze in-state tuition at public universities, $34 million to provide dental services to adults on Medicaid, and about $90 million to expand public preschool offerings.
Lawmakers have budgeted $2 billion in reserves which they hope will cushion the blow. For context, the state’s projected general fund revenues are about $25 billion a year.