Virginia Revenue Gap Smaller Than Expected...At Least So Far
The COVID-19 pandemic hasn’t taken as big a bite out of state revenues as initially expected, according to a state report released on Thursday.
Back when the pandemic first hit Virginia in March, Gov. Ralph Northam’s finance chief warned of a $1 billion hit to revenues in the fiscal year that ended June 30 compared to the original forecast done in December.
Instead, the damage was less than a quarter of that, with revenues $236.5 million below the official forecast.
“While I am pleased that our revenue shortfall is less than initially expected, we know this pandemic will continue to negatively affect our state’s finances as long as this virus is with us,” Northam said in a statement.
It remains unclear what the numbers mean for the state’s two-year budget. Lawmakers opted to freeze the 2019-20 budget spending levels when the pandemic hit rather than authorize new programs on housing, education, and other areas that they initially approved during the legislative session.
Northam’s finance team will now re-assess where they think state finances are headed for the next two years. He’ll announce their findings at an annual address to the General Assembly’s money committees on August 18.
Lawmakers will then meet at a yet-to-be determined date in a special session to update the budget they passed in March, which included new spending for Democratic priorities like schools, higher education, housing and healthcare.
Del. Luke Torian (D-Prince William), who plays a key role in writing the state budget as chair of the House Appropriations committee, also sounded a cautiously optimistic note.
“We’re in a little better shape than we thought we were going to be in,” Torian said in an interview. “But make no mistake: Things are still pretty tight and we’re going to have to be pretty disciplined as we go into this reforecasting.”
In March, Secretary of Finance Aubrey Layne predicted an up to $2 billion revenue shortfall over the next two years compared to the December forecast. Torian said on Thursday that he expected the new estimate would still be in that ballpark. And he said it could be several years before the state economy fully recovers to pre-recession levels.
Some local governments, which rely more heavily on sales taxes, have already laid off or furloughed employees and are bracing for further cuts.