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Senate Finance Committee Receives Economic Outlook

Man waving
Dick Saslaw (D, Springfield) sits on the Virginia Senate Finance and Appropriations Committee. The committee met Thursday to hear an update on the state's financial situation. (Screenshot: Committee Video)

The state Senate Finance and Appropriations Committee convened - some members via Zoom - Thursday for a yearly “retreat” and breakdown of fiscal issues in Virginia.

State revenues around the nation were hit hard by the COVID-19 pandemic. Virginia was no different, but several key industries, including information technology, construction and transportation, have stayed relatively strong. 

That reduced the total shortfall to under 3% of the commonwealth’s fiscal year 2019 budget, according to a report by Moody’s, an independent analytics firm.

The uncertainty has extended to essentially every aspect of Virginia’s economy, and staff gave presentations on a few specific sectors, including outlooks on Medicaid and education.

Medicaid:
The number of Virginians enrolled in Medicaid shot up this year - and the program’s costs with it. That’s due in part to the coronavirus pandemic, but officials were expecting a spike anyway.

Medicaid expansion that went into effect at the beginning of 2019 was projected to make over 400,000 more Virginians eligible for coverage.

Between 2019 and 2020, Medicaid enrollment increased by nearly 200,000, or 17%, in the state. The program grew by another 160,000, or 12%, for 2021, according to the Department of Medical Assistance Services

As enrollment climbed, Medicaid spending in the state rose by $2.2 billion, or just under 20%. Despite the rising costs, the amount Virginia spent actually fell by around $500 million as the federal government increased contributions during the pandemic.  

In order to receive increased federal funds for Medicaid in the pandemic, Virginia can’t disenroll any person from the program unless they move out of the commonwealth.

Barring further action from D.C., the extra aid is set to end in July 2021.

Education:
COVID-19 did not have the impact on higher education enrollment numbers that experts predicted, according to an analysis by the State Council of Higher Education in Virginia.

According to the data, which is not finalized, public two-year colleges were the hardest hit, seeing a 9.7% decrease in enrollment. Four-year state schools saw little change, while enrollment at private colleges actually increased by 6.6% from 2019.

Committee staff said much is unknown about the outlook for the state’s colleges and universities. It’s clear that federal aid saved schools from the worst of the pandemic, but what comes next in terms of aid, financial losses and enrollment is not. 

Staff also broke down the digital divide for K-12 students. Almost one in five Virginia children still lack necessary internet access, according to the National Education Association. A disproportionate number of those students are Black or from households under the federal poverty line.

The Virginia Department of Education predicts overall learning losses, normally expected in summer months, were compounded by the transition to virtual learning - with more of the burden felt by students left behind in the digital divide.

K-12 schools also saw a drop-off in enrollments, most notably in a 12.8% decrease in new kindergarteners.

Looking forward:
Lawmakers also heard reports on transportation and the overall budget. A full agenda is available on the Finance Committee’s website.

The state Senate plans to meet next in January, for the regular General Assembly session, when lawmakers will work with Gov. Ralph Northam to begin crafting Virginia’s next budget.