Sen. Lewis: Budget and School Funding Top Governor’s and Legislators’ Agenda

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By Connie Morrison
The takeaway from Sen. Lynwood Lewis’ Dec. 18 town hall meeting was this: election years are difficult ones for progress, but certain things must get done.
The difficulty with election years is that even the most routine legislative matters can become mired in politics. All 100 delegate seats and 40 senatorial seats are up for election. “To make it even worse, about a two-seat swing in either chamber will change control of either chamber,” Lewis said.
Lewis began the information session by outlining Gov. Ralph Northam’s legislative priorities for the year. The first is to tackle the budget.
“We ended the last fiscal year with a roughly $500M surplus,” he said, but all of the revenue surpluses are designated as mandatory deposits into the clean water fund and the budget stabilization fund (also called the rainy day fund).
After those mandatory deposits are the questions of conformity to the federal tax code. It is usually a pretty standard format and noncontroversial.
“It helps people plan, make decisions, and get ready for federal taxes,” said Lewis. “This year it’s kind of been stood on its head” because of federal tax changes. The legislature must decide whether to conform, and the policy decisions that come with that, or to not conform and foist on Virginia residents what accountants have said will be a 15-page state income tax return.
Conformity includes the question of what constitutes adjusted gross income. “What we do after that,” he said, “assuming we conform, is wide open.”
Gov. Northam “has proposed that we make Virginia’s earned income tax credit fully refundable,” as the federal credit is. The federal credit was created in 1975 and is referred to as help for the working poor, Lewis said. “Ours is simply a credit against their state obligation” and is not refundable. The proposal will cost about $250 million.
Lewis said about 3,900 tax returns in Accomack County, and another 1,500 in Northampton, have claimed the federal earned income tax credit, so a substantial portion of the population in both counties would be affected by the governor’s proposal.
“I don’t think the governor’s plan is going to have much of a shot,” he said in a candid response to a question from an audience member.
Complicating matters is that the federal tax change is not permanent – it would last about 4 years – “so we would have to key into the limited life span on that, and there is obviously controversy about that,” he said. The governor feels strongly about his proposal. “We’ll see how it plays out,” he said.
The second big decision is whether to tax internet sales following a Supreme Court decision affirming the right of states to collect tax from internet transactions.
“Brick and mortar retail folks are very happy about that because they have been clamoring for that for years,” said Lewis. He estimated revenue from that proposal at $300 million, but acknowledged much of the sales tax revenue is dedicated and the net discretionary revenue is estimated at $60-$70 million.
Other options include taking a look at Virginia’s standard deduction, personal exemption, and tax rates. “Our rate is 5¾ percent at the top end on the income tax and we haven’t done anything since 1987,” he said. “So there are options.”
Gov. Northam is proposing a significant increase in K-12 funding, an additional 2 percent pay raise for public school teachers. “When we fund a pay raise for our teachers, we fund the state share. There is a local share as well that has to be funded,” he said.
“In addition, we propose to put $88 million into construction through the literary fund” as a first step toward meeting a $4-$6 billion school construction need across the commonwealth.
The governor wants $46 million for broadband. “We’ve got about a $20 million price tag on full build out here,” he said. “Hopefully, we can get access to government monies.”
Lewis’ own priorities will include getting money into the coastal resiliency fund, encouraging use of the Columbia aquifer, and establishing enabling legislation for localities to partially exempt from taxation real property prone to flooding if the owner makes flooding resiliency improvements. The latter measure was approved by voters in the November election. Lewis also expects proposals to surface — and bills to be drafted — from the aquaculture work group.

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