For Immediate Release: March 28, 2017
Contacts: Office of the Governor: Brian Coy, Brian.Coy@governor.virginia.gov

Governor McAuliffe Releases Amendments to the Commonwealth’s Biennial Budget

~Announces amendments to reinstate investments in economy, mental health in jails~

 

RICHMOND – Governor Terry McAuliffe today released details of the 27 amendments he has made to the Commonwealth’s biennial 2016-2018 budget. Below is a copy of the full letter the Governor transmitted to the House Clerk on Monday evening.

 

March 27, 2017

TO THE HOUSE OF DELEGATES

HOUSE BILL 1500

I approve the general purpose of this bill, but I am returning it without my signature with the request that 27 amendments be adopted.  Although the enrolled bill achieves most of the major objectives I proposed to you, I am returning it to you with amendments to address concerns that I have either noted to you previously or that have been brought to my attention since your passage of the budget. 

I am grateful to each member of the House of Delegates and the Senate for your dedicated work and your timely passage of the budget.  While we may differ on some of the details, your efforts reflect general support for the initiatives I proposed in the introduced budget and our shared commitment to strengthen Virginia’s economy.

Specifically, the House and Senate are to be commended for keeping the promise we all made to make compensation increases for our dedicated state employees and state-responsible local employees the priority issue in this budget.  Likewise, I believe that we addressed the revenue shortfall, and balanced this budget in a manner that was fair, while protecting public education and other high priority services. 

I applaud the commitment to fiscal prudence that you have demonstrated in this budget.  The adherence to sound fiscal management, along with adoption of a Revenue Cash Reserve to guard against short-term revenue shocks, will help to ensure that the Commonwealth has the cash on hand to address potential negative impacts from sequestration, hiring and pay freezes for the federal workforce, or other potential federal actions. 

Your decision to adopt a conservative revenue estimate and resist the temptation to raise the revenue forecast is commendable; however, I believe that we must do more to increase the unappropriated balance in this budget.  The budget I introduced contained an unappropriated balance of $16.1 million.  The budget returned to me reduces that to $3.6 million.  My amendments will more than double the unappropriated balance contained in HB 1500 as enrolled.

Of the 27 amendments that I am proposing, 13 change spending, 11 are language-only changes, and three increase the resources available. 

My spending amendments are more than supported by the additional revenues and technical savings that I have identified.  In fact, my amendments add nearly $1.2 million in new revenue, and reduce total spending from the general fund by approximately $5.7 million.  Consequently, the net result of the revenue, savings, and spending amendments I am recommending increases the unappropriated balance from $3.6 million to $10.4 million.  A summary of these amendments is provided below.

 

Summary of Amendments

Capture prior year recovery - Item 0

My amendment makes a $200,000 technical adjustment to general fund revenue in FY 2017 to reflect a prior year expenditure refund received in the current year by the Department of the Treasury.

Reflect effective date of budget on Sales Tax Nexus changes - Item 0

§3-5.15 of the enrolled budget bill includes sales tax nexus changes that generate additional revenue. The enrolled bill assumes revenue in FY 2018 for this purpose but contains no added revenue in FY 2017 despite the fact that the provisions of the budget bill will be effective upon passage.

My amendment assumes an added $916,667 in revenue for FY 2017, representing a start date of June 1, 2017, for the sales tax nexus changes.

Make technical correction to assumed revenue - Item 0

Item 311 of the introduced budget proposed the authorization of new licensing fees for providers of adult behavioral health and developmental services. The introduced budget assumed a total of $250,000 in revenue from this proposed action. The enrolled bill removes the authorizing language in Item 311 but also removes $300,000 in assumed revenue instead of $250,000.

My amendment adds back $50,000 in general fund revenue to reflect the correct reversal of these amounts.

Savings from closure of Peumansend Creek Regional Jail - Item 69

The Peumansend Creek Regional Jail is scheduled to close on June 30, 2017.

My amendment captures approximately $4.0 million in savings related to the closure.

Funding for mental health assessments in jails - Item 70

Providing mental health services to offenders in local and regional jails strengthens public safety while addressing the challenges facing individuals with mental illness in our communities. The language approved by the General Assembly, requiring all jail staff to screen a person for mental illness, is a good step in the right direction.

My amendment recognizes this effort and provides $442,500 from the general fund in the second year to allow the Compensation Board to model a staffing standard consistent with the approved language related to mental health assessments. By modeling this initiative, the Compensation Board will be able to provide a better evaluation of the costs and benefits of requiring all jails to assess offenders within 72 hours of the initial screening by a qualified mental health professional.

Restore state funding for election activities - Item 86

The enrolled budget eliminates one-time general fund support of $105,000 for a call center to address citizens' questions about the upcoming state elections and $50,000 to print additional voter registration and absentee ballot applications for distribution to third-party registration groups and state-designated voter registration agencies, as required by the National Voter Registration Act and the Code of Virginia. The enrolled budget also eliminates $500,000 of general fund support provided in my introduced budget to backfill the Department of Elections’ operating expenses currently funded through the federal Help America Vote Act (HAVA) grant that is expected to be depleted before the end of FY 2018.

My amendment restores $655,000 in FY 2018 to support citizens’ access to information needed for the November 2017 elections and to maintain the Department of Elections’ operations when the HAVA funding expires.  The integrity of our elections depends on adequate resources.

Restore funding for a solar initiative - Item 120

The enrolled bill removes $1.1 million to support the growth of the solar industry in the Commonwealth. The development of solar energy is a critical component of a diversified mix of energy sources in the Commonwealth. The solar industry has developed and matured in other states, placing Virginia at a competitive disadvantage for attracting new businesses that demand access to alternative energy sources.

My amendment provides $1.1 million from the general fund in FY 2018 to support an expanded clean energy industry. Priority in the use of these funds will be given to solar energy projects in local public school divisions and to assist commercial, institutional, and individual customers in financing solar projects. Without this amendment, the Commonwealth would lack any dedicated funding to expand the development of solar energy.

Amend language regarding the withholding of appropriation - Item 125

The enrolled budget includes language authorizing the Comptroller to withhold general fund appropriation in the amount of $1.5 million from the Virginia Economic Development Partnership (VEDP) and to disburse the funding only as directed by the Chairmen of the House Appropriations and Senate Finance Committees following the chairmen’s receipt and evaluation of certain plans. However, the Virginia Constitution prohibits the General Assembly from delegating final legislative authority regarding budget or other enactments to a committee composed of a subset of the members of the General Assembly.

My amendment strikes the language requiring notification to the Comptroller by the Chairmen of the House Appropriations Committee and the Senate Finance Committee, and provides for the release of funds upon submission of the plans.

Summer Cyber Camps - Item 138

The budget as approved by the General Assembly did not include the funding I recommended for summer cyber camps. At a time when the Commonwealth has 36,000 unfilled cyber jobs, removing funding for cyber camps is short-sighted and fails to take into account the demand for cyber careers and the benefits of beginning cyber training and exposure prior to post-secondary education. Cybersecurity is a rapidly growing industry, requiring many new employees. We already have difficulty filling the open positions in this area. Virginia needs to offer programs and incentives to generate these new employees or risk losing these jobs to other states.

My amendment provides $480,000 from the general fund in FY 2018 for summer cyber camps.

Restore funding for cybersecurity public service scholarships - Item 144

The budget passed by the 2017 General Assembly eliminated $500,000 in FY 2018 funding and related governing language for the cybersecurity public service scholarships program approved by the 2016 General Assembly. This program was intended to strengthen the state's ability to recruit cybersecurity talent by awarding scholarships to individuals who would work for the state upon completion of their cybersecurity academic program. Given the great quantities of sensitive information held by the state, and the difficulty for the state in competing with the private sector for individuals with experience in protecting information technology from cyber attacks, this program is vital for the state to continue defending itself from hackers and criminals.

My amendment provides $500,000 from the general fund in FY 2018 and restores the associated language.
 

Cybersecurity Program Funding - Item 213

Amendment 213 #2c removes the funding approved by the General Assembly in 2016 that allowed the community college system to hire a full-time employee to design and implement a cybersecurity curriculum, and provided funds to individual community colleges to support faculty engagement, curriculum development, and professional development for college personnel in cybersecurity. These efforts will provide the foundation for all community colleges to offer cybersecurity courses, allowing them to compete for a designation as a federal center of excellence for cybersecurity. Such designation is vital for graduates of cybersecurity programs to readily obtain jobs in the rapidly growing cybersecurity field.

My amendment restores this funding by providing $280,000 in FY 2017 and $152,000 in FY 2018 from the general fund to allow the community colleges to continue moving forward in providing cybersecurity education to Virginians seeking good paying jobs.

Amend Virginia Tech Extension fund split language - Item 229

The enrolled budget directed that the general fund share for the Virginia Tech Extension shall be 95 percent for state funding calculations. The language does not specify the effective date of this provision and would require an additional $1.0 million from the general fund if implemented for funding calculations in the current biennium.

My amendment clarifies that this provision will take effect for state funding calculations beginning July 1, 2018.

Partially restore budget reductions - Item 247

My introduced budget proposed a five percent reduction in general fund support to all institutions of higher education in FY 2018, including Eastern Virginia Medical School (EVMS). The General Assembly lowered the reduction for a number of higher education institutions but accepted the five percent reduction for EVMS.

My amendment changes the reduction to EVMS from five percent to four percent to be more consistent with the restoration of funds provided to most other higher education institutions in the enrolled budget.

Authorizes transfer of nutrition program - Item 294

I strongly believe that food security and nutrition are essential to the support of our youth so they may achieve educational success. Currently, the Department of Education (DOE) administers the National School Lunch Program, which is a federally assisted meals program operating in public and nonprofit private schools and residential child care institutions. It provides nutritionally balanced, low-cost, or free lunches to children each school day. The Virginia Department of Health (VDH) administers the Summer Food Service Program (SFSP), which is a federally assisted meals program that provides meals and snacks to children during the summer months when school is not in session. VDH also administers the Child and Adult Care Feeding Program (CACFP), with the At-Risk Afterschool Meals Program component of the CACFP serving healthy meals and snacks to children and teenagers who participate in afterschool programs in low income areas. The Summer Food Service Program and the At-Risk Afterschool Meals Program provide a function that is similar to the National School Lunch Program and therefore should be administered by DOE.

My amendment adds language that authorizes the Director, Department of Planning and Budget, to transfer the associated appropriation and authorized positions supporting the federal Summer Food Service Program and the At-Risk Afterschool Meals Program component of the CACFP from the Virginia Department of Health to the Department of Education upon the execution of a memorandum-of-understanding between the two agencies and after coordination with the United States Department of Agriculture to ensure a seamless transition. Since both federally assisted programs are provided by the United States Department of Agriculture, consolidating these programs under one agency would increase program capacity and efficiency.

Support Local Health Department Rent and Renovations – Item 295

Many of the local health department offices are in space that has been under long-term lease contracts.  As these contracts expire, we often must adjust funding to reflect current market prices.  In FY 2018, the contracts in the Chesterfield and Accomack office must be renewed and the terms of those renewals are now known.

My amendment provides $303,236 from the general fund in FY 2018 to fund rent increases and renovation costs for these two local health departments so that they may continue to provide vital health services to our citizens. These funds are necessary to allow for the uninterrupted provision of these services, including immunizations and disease detection and prevention.

Clarify the authority of DMAS informal appeals agents - Item 306

The enrolled budget allows informal appeals agents at the Department of Medical Assistance Services to close an informal appeal based on a settlement between the parties up to $250,000 without legal review by the Office of the Attorney General. The removal of this legal review could create several problems and could result in inconsistent settlement policy. The Office of the Attorney General should review and approve all compromises of claims of the Commonwealth pursuant to §2.2-514 of the Code of Virginia.

My amendment clarifies the authority of informal appeals agents but retains the legal review of settlement language by the Office of the Attorney General.

Restore authority to implement federal health care reforms - Item 306

I ask that you reconsider budget language that would allow Virginia to quickly react to and take advantage of the nation’s health care policy should it continue to benefit the Commonwealth.

My amendment restores authority for me, on or after October 1, 2017, to direct the Department of Medical Assistance Services (DMAS) to amend the state’s Medicaid plan if the federal Affordable Care Act (ACA) is continued, amended, or replaced through federal law or regulation, such that an enhanced federal medical assistance percentage (FMAP) rate is available for newly eligible individuals. Any savings associated with such action would be unallotted and reserved for appropriation by the 2018 General Assembly. This measure ensures that I can respond to the evolving health care landscape and ensure Virginians can take advantage of any new opportunities presented by changes in federal programs.

Strike supplemental payment language - Item 306

As you know, over my tenure as Governor I have been a staunch advocate for ensuring that the hardworking taxpayers of Virginia get their fair share of federal revenue returned to the Commonwealth. However, I cannot in good conscience allow our state to pursue actions that might jeopardize future funding and place vulnerable Virginians at risk.

The enrolled budget includes language that seeks to make supplemental Medicaid payments to certain private hospitals. In order to offset some portion of the added cost of these payments, state agencies not associated with the Medicaid program would be required to transfer funds currently budgeted for safety net and other human services into the Medicaid program. While private hospitals might voluntarily work with the impacted programs to preserve these services, there is not and cannot be any assurance that this will occur without violating federal rules. Should the federal government determine any arrangements exist between enhanced payments and services being provided by the hospitals on behalf of the state, the associated Medicaid payments would be deemed improper, leading to disallowances and creating a financial liability for the Commonwealth.  Further, it is inappropriate to create the expectation among these private hospitals that the Commonwealth will be able to provide these supplemental payments.  The budget as enrolled does not provide any funding specifically for these; instead, it relies on the transfer of funds currently appropriated for ongoing services.

My amendment strikes this language to avoid significant risks to the Commonwealth with regard to financial liability, federal scrutiny, and critical services.

Remove language relating to Public Private Transportation Act of 1995 - Item 436

The General Assembly added budget language that would to extend public works contract requirements that presently pertain only to state-initiated transportation projects to include projects developed under the Public-Private Transportation Act (PPTA) of 1995. This could preclude vendors with union labor from participating in PPTA projects.

My amendment strikes this new restrictive language since it is likely to limit the number of companies willing to participate in transportation projects under the Public-Private Transportation Act. Vendors involved with PPTA projects are typically national and international firms. Any restrictions on these vendors will reduce the possible benefits Virginia could reap from its PPTA projects.

Administrative actions related to toll violations - Item 442

Recent news has revealed a problem with some private toll operators placing exorbitant fees on individuals with toll violations. Charging amounts greater than $2,200 against first time toll violators, or proposing settlements greater than that amount, runs counter to the spirit and intent of the agreements we have signed with private toll operators.

My amendment establishes stricter parameters for when the Department of Motor Vehicles can refuse to issue or renew a vehicle registration or license plate to an individual identified with toll violations. It is anticipated this language will help discourage toll facility operators from charging exorbitant fees for toll violations.

Capture state health insurance savings - Item 475

The enrolled budget did not include any changes to the state health insurance premiums or enrollment estimates included in Chapter 780, 2016 Acts of Assembly. The actuary’s report for the state health insurance plan recommends lower total premiums than the premiums funded in Chapter 780 for the COVA HealthAware, COVA High Deductible, and Kaiser Permanente health plans.

My amendment reduces the monthly premiums for employees enrolled in the COVA HealthAware plan. Updating employee enrollment figures with more recent data provides sufficient savings to fund the employer’s share of these premium updates and generates net general fund savings.  These changes result in a net general fund savings of $263,683 in FY 2017 and $557,646 in FY 2018 based on updates to 2016 state health insurance plan enrollments and premiums for the COVA HealthAware, COVA High Deductible, and Kaiser Permanente health plans provided by the Department of Human Resource Management.

Increase Jamestown-Yorktown 2019 Commemoration reversion - Item 475.10

As you know, my introduced budget proposed $5 million in general fund support for the 2019 Commemoration, while the budget passed by the General Assembly provides $10.0 million.

My amendment reduces an additional $5 million in general fund support in FY 2018 from the appropriation for the Jamestown- Yorktown 2019 Commemoration in the reversion clearing account established by the General Assembly.  After this action, the budget will still provide $5.0 million in general fund support for the 2019 Commemoration. These savings will not be spent but instead be added to the bottom line to double the unappropriated balance, thus providing additional cushion in case we face negative revenue issues resulting from potential federal budget cuts and the freeze on federal hiring.

Remove appropriation diverting funds from VCEDA - Item 476

The enrolled bill directs the Virginia Coalfields Economic Development Authority (VCEDA) to provide up to $500,000 of its balances to the Lenowisco and Cumberland Plateau Planning District Commissions to support economic development activities in Southwest Virginia. Currently, the Lenowisco and Cumberland Plateau Planning District Commissions each receive $75,971 from the general fund in each year. Further, the budget also provides funds for the Virginia Initiative for Growth and Opportunity in Each Region (GO Virginia). GO Virginia's focus is the creation of state financial incentives, technical support, and other assistance that will encourage collaboration for private-sector growth and job creation by business, education, and government entities in nine designated regions. Each region is or will be soon developing a plan for spurring regional growth.

My amendment removes the appropriation and corresponding budget language. I believe that the VCEDA funds duplicate efforts that can be accomplished through GO Virginia.

Increase maintenance reserve funding - Item C-44

Scott House, completed in 1911, sits in the middle of the Virginia Commonwealth University (VCU) campus on Franklin Street. Due to deteriorating conditions of the building and the recent collapse of a ceiling, the university has removed all employees from the premises and braced the structure in places where additional failures could occur. This facility is on the National Registry of Historic Places and repairs are necessary if the building is to be used by the university to support academic programs in the future. Unless repairs are done soon, there is danger of additional structural failures.

My amendment provides up to $3.5 million of additional bond support for maintenance reserve, to be used by VCU to stabilize and repair the Scott House. The state normally provides one hundred percent of funding for facilities identified as providing educational and general programs, such as the Scott House. For this project, however, the university will be required to equally match the state funding provided.

Additional funding for War Memorial project - Item C-48.10

The original scope of the Virginia War Memorial capital project included a three-level parking deck; however, the current funding is sufficient for only a two-level deck.

My amendment adds $1.5 million of Virginia Public Building Authority debt to cover the additional costs so that the project may proceed, including a third level for the parking deck, as originally intended.

VCBA bond issuance authorization language - Item C-48.10

Item C-48.10 of the introduced budget originally included only projects for which bonds are issued by the Virginia Public Building Authority (VPBA). The enrolled budget amends this item to include projects of agencies for which the Virginia College Building Authority (VCBA) normally issues bonds, but did not include VCBA in the authorizing language.

My amendment adds language authorizing VCBA to issue bonds for projects in this item.  Explicit legislative authorization is required to issue VCBA debt.

Virginia Birth-Related Neurological Injury Compensation Program Language - Item 4-5.01

My amendment clarifies conditions for payments made under the Virginia Birth-Related Neurological Injury Compensation Program and requests that the State Corporation Commission report on options to improve the actuarial soundness of the program.

Conclusion

I am not recommending any changes to the conservative base revenue forecast upon which we have agreed throughout this General Assembly Session.  My requested spending is offset by three amendments that add $1.2 million in additional revenue available in FY 2017, and from savings in two technical amendments that capture approximately $4.8 million of unneeded appropriations in FY 2017 and FY 2018.

Taken together, the additional revenue and the savings from reduced appropriations provide approximately $6.0 million with no changes in policy.  These resources more than cover the cost of my spending proposals that total approximately $4.1 million.

As I previously stated, the level of the unappropriated balance concerns me.  The budget you presented to me contained an unappropriated balance of $3.6 million.  I believe that it is prudent to leave sufficient resources for unforeseen circumstances that may surface in the future; and given our current circumstances, $3.6 million is not adequate.  To that end, in addition to the balances that will be added by the amendments I have discussed thus far, I am returning this budget to you with one last amendment that I hope you will give serious consideration. 

I have been consistent in my message that $10.0 million is too much to spend for the Jamestown-Yorktown Commemoration.  I am proposing to reduce the general fund appropriation to the Jamestown-Yorktown Commemoration by $5.0 million in FY 2018 and that these savings not be spent but instead be added to the bottom line to double the unappropriated balance to more than $10.4 million.  This will preserve those funds for other potential economic shocks that we are likely to face, especially given the President’s proposed budget and the prospects that the federal government will operate in the near term under a continuing resolution that essentially will lead to further sequestration actions.  If we determine next year that the additional unappropriated balances are not needed and the Commemoration still needs these funds, this issue can be revisited.  Until then, I ask that you show the prudence to redirect these balances to the bottom line.

Attached to this letter are the details of my proposed amendments.  In your review of these proposals, I think you will find they are relatively minor and consistent with the objectives that I have stated throughout my administration and this legislative session. 

I respectfully request your adoption of these amendments so that they may be incorporated into the amended Appropriation Act for the 2016-2018 biennium.  Thank you for your consideration of my requests and for your service to the Commonwealth.


Respectfully submitted,

Terence R. McAuliffe

 

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