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Virginia has a lot of extra cash, but not as much as it seems

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Jahd Khalil / RADIO IQ
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The House of Delegates will have to sort through how much of a flush budget they can, and want to, spend.

Staffers on the House of Delegates Appropriations Committee spoke cautiously about Virginia’s finances while outlining how the Commonwealth became flush with cash during the course of the pandemic.

When Republicans come into power next January they’ll have some big numbers to play with. The General Assembly left about a billion dollars in federal American Rescue Plan unspent. And Virginia has a $2.6 billion dollar budget surplus for fiscal year 2020, after revenue collections of 14.5% far surpassed a 2.7% forecast.

“In all my years here, those are certainly funding levels that I've never seen,” said Anne Omen, Director of the House Appropriations Committee Staff. She went through all the things that led to so much extra money but told Delegates to be careful.

One example of a delicate finance situation was a $653 million reduction in Medicaid spending due to federal aid and lower expenditures due to the pandemic. The massive savings there are not likely to continue and other economic risks exist as well which could preclude changes in permanent spending and programming. Oman cited supply chain issues, labor shortages, and a resurgence of Covid as reducing incoming revenues. Delegates asked about inflation, but staffers weren’t as concerned: it means both higher costs and higher revenues.

“We feel like putting a lot of loud caution signs,” said Oman. “Focus on those one-time non-recurring issues, address some of the longstanding concerns that we haven't been able to get to over the years.”

Policymakers will also have to navigate legal requirements to make deposits into Virginia’s reserves from the budget surplus, and restrictions on how federal Coronavirus aid is spent. Those make the practical amount of additional revenues less than it appears

While Governor Ralph Northam will present a budget in mid-December, Governor-elect Glenn Youngkin will propose his own budget next year. It will have to go through the Senate and House of Delegates.

This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.