Gov. Northam’s Last Budget Proposal Includes Tax Relief, Pay Raises

RICHMOND, VA — Outgoing Gov. Ralph Northam released the final proposed budget of his term in office Thursday, a two-year plan that uses big surpluses to give state employees a 10-percent raise, pay off $1 billion in pension liabilities, and contribute $500 million toward repairing or replacing outdated public school buildings.

Northan said Thursday that the state’s fiscal responsibility during the COVID-19 pandemic has allowed him to focus on education and helping lower- and middle-income Virginians.

The two-year, $158 billion budget takes advantage of massive surpluses that have resulted as the state emerges from the pandemic. The budget “is a roadmap to continue Virginia’s success,” Northam said in a statement Thursday.

Northam's successor, Gov.-elect Glenn Youngkin, will get to make changes to the budget once he takes office on Jan. 15.

Youngkin and Lt. Gov.-elect Winsome Sears attended Northam's presentation of the budget to General Assembly committees Thursday morning at the governor's invitation.

State revenue has far exceeded the estimates of a year ago. Virginia reported a surplus of $2.6 billion for the fiscal year that ended in June, the largest in state history, and anticipates an additional $13.4 billion in revenue over the rest of this year and the coming two fiscal years.

Many of the budget proposals released Thursday were revealed during Northam's recent "Thank You, Virginia" Tour.

Northam’s budget “sets the incoming administration up for success in virtually every facet of state government: education, the environment, broadband, behavioral health, public safety, and economic development,” his office said.

For tax policy, Northam is proposing to eliminate the 1.5-percent state grocery tax. Currently, Virginians pay 2.5 percent tax with 1 percent going towards local government. The proposal would not eliminate the tax entirely but would cut expenses going towards the general fund.

“While we’ve had some ups and downs — particularly in the early months of the pandemic — I can confidently say that our economy today is the strongest we’ve seen in a very long time,” he said in prepared remarks. “We ended the last fiscal year with the largest surplus in the Commonwealth’s history.”

ALSO SEE: Northam Seeks Tax Rebates, Elimination Of State Grocery Tax

Virginia, like other states, has benefitted from federal COVID-19 pandemic funding. “Please don’t fall into the trap of believing that’s the reason for the surplus,” Northam said. “Pandemic funding is one-time — revenues are ongoing. And those booming revenues show us that the things we’ve been doing these four years are working.”

When Northam took office four years ago, Virginia was on a negative credit watch.

“My goal was to get our credit back on the positive side of the ledger, and to set aside the equivalent of 8 percent of our budget in reserves,” the governor said. “Well, we did that, and much more. I’m happy to say that our AAA rating is safe and sound, and this budget puts $1.1 billion in our Revenue Stabilization Fund. We’ve also added a voluntary deposit, another $564 million.”

For teachers, Northam is proposing a 10-percent raise, five percent in each of the next two years. “This is the right way to say thank you to our teachers for all they do every day — especially for all they have done during this long pandemic,” he said.

Northam also is proposing a 10-percent pay raise for all state employees, five percent in each of the next two budget years.

“Our state workforce is what makes government run. They are the service in public service,” he said. “None of the services we all rely on — from fixing roads, to keeping state parks open, to the public health services we’ve needed so much these past 20 months — none of that would happen without state employees, and this is a way to thank them for their hard work.”

His proposed biennial budget also includes $500 million to help localities construct or renovate school buildings.

“This isn’t the first time we’ve proposed school construction loans — in fact, we proposed it through the Literary Fund in 2018. But this is the most we’ve ever proposed to help ensure students have a healthy and safe learning environment,” Northam said.

Read the governor’s full remarks on the budget proposal here.

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