Virginia's governor calls special session to review the 2021 budget

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Virginia Gov. Ralph Northam has called a special session of the General Assembly to review the state budget based on a revenue forecast that will be revised due to the COVID-19 pandemic and resulting economic downturn.

The special session will take place Aug. 18, the same day Northam will provide lawmakers with a year-end fiscal report.

Virginia Gov. Ralph Northam has called lawmakers back to Richmond to review the state budget on Aug. 18.

Northam signed a $67.04 billion general fund budget for fiscal 2021 on May 20, knowing that it would be revisited once officials had a better idea how the novel coronavirus was impacting state revenues.

The budget froze $2.2 billion in new spending Northam had proposed for early childhood education, tuition-free community college, affordable housing, and broadband initiatives.

"This strategy allowed time for the commonwealth’s fiscal outlook to stabilize and avoided major cuts to important new programs and state services," Northam said in a statement. “I look forward to bringing legislators back in session as we continue to navigate these unprecedented times."

The special session will also include consideration of criminal justice and policing reform measures, such as accountability and oversight, use of force, increased training and education, and officer recruitment, hiring, and decertification.

On July 9, Northam announced Virginia ended fiscal year 2020 with a deficit of approximately $236.5 million in general fund revenue collections.

While a shortfall was anticipated due to the impacts of COVID-19 on the state’s economy and budget, it was far smaller than the $1 billion that some forecasters had expected.

The main drivers of the revenue shortfall were payroll withholding and sales taxes, which together make up 85% of total revenues supporting the state budget. Combined, they came in 2.1% behind forecasts.

"The commonwealth has had a significant contraction in jobs and those effects on payroll withholding and the ability for consumers to spend is an obvious concern going forward into fiscal year 2021 for the state budget," Secretary of Finance Aubrey Layne said at the time.

S&P Global Ratings affirmed the state's AAA general obligation rating and stable outlook on July 2.

"The AAA GO rating and stable outlook reflect our opinion of the commonwealth's strong financial management as well as Virginia's solid cash and liquidity position," said S&P analyst Sussan Corson. "While the commonwealth's revenue and costs are likely to be strained by the economic effects of COVID-19, we believe Virginia has the resources to manage through these challenges."

Fitch Ratings and Moody's Investors Service also assign AAA ratings to the GOs, with stable outlooks.

As of Thursday, Virginia reported 78,182 confirmed cases of COVID-19, and 3,055 probable cases. Some 2,051 people had died from the disease, according to the Virginia Department of Health.

In response to the spreading virus, Northam on July 15 imposed what he said were the nation’s first statewide emergency workplace safety standards.

Those standards require all employers to mandate social distancing measures and face coverings for employees in customer-facing positions; to provide access to hand washing stations or hand sanitizer; and to regularly clean high-contact surfaces. Employees must also be notified within 24 hours if a coworker tests positive for the virus.

“Workers should not have to sacrifice their health and safety to earn a living, especially during an ongoing global pandemic,” Northam said. “In the face of federal inaction, Virginia has stepped up to protect workers from COVID-19, creating the nation’s first enforceable workplace safety requirements."

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State tax revenues Coronavirus General obligation bonds Ralph Northam State of Virginia Commonwealth of Virginia
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