On March 12, 2020, the regular session of the General Assembly adjourned after adopting a budget for the next two years. It is a budget that will take us forward and that we can be proud of, but there are caveats.
The biennial budget is built on projected growth over the next two years of three percent. The February forecast showed Virginia experiencing about six percent growth to date, so three percent seemed to be a conservative estimate. However, the stock market has fallen more than 25 percent over the last few weeks. We need to be concerned about the economy at this point for several reasons. Major forecasts are predicting a recession this year, so there are a few things we need to take into consideration.
First, Saudi Arabia and Russia have engaged in a price war over crude oil. The Saudis have a low cost of production, fractional to us and the Russians. When they produce more oil, they drive cost down. This benefits consumers, like you and me, because we pay a lot less at the pump for a gallon of gasoline. However, because so much of our economy is tied up in energy production, it sends a chilling ripple through the industry and the economy.
In past years, the United States could attempt to mediate such a dispute. However, we have given up that sort of international role. The dispute is to a large extent out of our control. The second problem definitely is out of our control.
Since COVID-19 was first identified in China several months ago, we have watched it spread in other countries and now are facing the reality of a pandemic here in the United States. We surpassed 100,000 confirmed cases globally with almost 5,000 deaths. The largest numbers are in China, South Korea, Iran and Italy. Virginia had its first confirmed case on Saturday, March 7, and we are now up to 30 cases today. In the United States, the problem is compounded by the lack of enough tests nationwide.
Locally, the Highland County Maple Festival, the Virginia Festival of the Book, and the Tom-Tom Festival have been cancelled. We are seen school closures and the cancellation of sporting activities at every level. The experts suggest that “social distancing” may be the best way to limit the spread of the disease. All of these actions will have a significant impact on our economy.
We can learn from what has happened in other nations, like China and South Korea. Both countries experienced significant short-term economic downturns, but drastic measures, that some would view as overreactions, have seemed to help limit the spread of the virus. The Governor, and many local governments throughout Virginia, have declared states of emergency to allow for a swift response to this developing situation. As I write, Congress is preparing to act as well.
The General Assembly adopted our two-year spending plan yesterday amidst this global conversation about the economy and the COVID-19 pandemic. The general fund operating budget for the biennial budget is about $48 billion. The budget includes about $2.1 billion in reserves, or four times the amount of the Rainy Day Fund in 2008, at the time of the last recession.
One of our top priorities is public education. In our budget, we provide for a 2% pay increase for teachers in fiscal year 2021 and an additional 2% in 2022. We were able to provide $46.1 million to support one counselor for every 325 schoolchildren by school year 2022. The General Assembly also followed the Governor’s lead and made significant investments in early childhood education.
The Virginia General Assembly made the policy decision to raise the state minimum wage. The first increase to $9.50 an hour will occur on January 1, 2021. The minimum wage will increase incrementally until it reaches $12 on January 1, 2023. The legislation also creates a study in 2022 to review the possibility of regional minimum wage. Candidly, Virginia is not monolithic; Fairfax and Galax are very different places. Recently, I read that a living wage in Loudoun county is over $16 an hour while a living wage in Bath County is around $10 an hour. An in-depth study will provide the necessary data to inform our decisions on how best to reach our goal of a $15 an hour minimum wage. The budget was adjusted to reflect the increased cost to the state of this action.
The budget also prioritizes healthcare. The final budget provides a dental benefit for adult Medicaid recipients. We also provided additional funding for STEP-VA and community-based mental health services. From a policy standpoint, we can more efficiently and effectively serve people with mental illness in the community than in an institutional setting. This budget reflects that reality. Importantly, the budget significantly increases the amount of funding for long-term supportive housing. People who have a stable home are much more likely to be successful. So often with mental illness, bridges get burned and families are worn out. Long-term supportive housing is critical to a person’s chance at long-term recovery.
Significantly, the General Assembly provided funds for the Governor’s community college initiative, Get Skilled, Get a Job, Give Back, to connect students of all ages to high demand industries. One of the major differences between the House and Senate budgets related to college affordability. The House wanted to appropriate more money to institutions of higher learning to hold the line on tuition. The Senate sought to infuse more money for financial aid. The compromise provides for tuition moderation funds in the first year and an increase in the financial aid the second.
The budget also includes priorities in the 25th District. I was successful in obtaining funding for five additional positions at Natural Bridge State Park and to include language to begin the process of planning for a state park at the Hayfields property in Highland County. Between that and the investment in Green Pastures in Alleghany County, we are moving the park system forward. I will continue to push in future years for a state investment in Biscuit Run, which will be a long-term process. The budget also mimics language in a bill I carried to start the process of reviewing the relationship between the state and the Virginia Horse Center. The goal here is to provide long-term stability to the facility, which benefits the Rockbridge area and the equine industry throughout the Commonwealth.
The General Assembly will reconvene on April 22 to consider amendments and vetoes offered by the Governor. Given the current instability in the economy due to oil prices and COVID-19, we may have to consider some budgetary matters this year as well. Many of our goals are contingent on growth, so that will require vigilance and work. Thank you again for allowing me to serve you in the Senate of Virginia. We accomplished so much this year together. If you ever need assistance, please contact my office at [email protected] or by phone at (434) 296-5491 or (540) 839-2473.