Governor Ralph Northam touted Virginia’s 2021 $2.6 billion surplus and economic recovery in his annual revenue speech to a joint meeting of the Senate Finance and Appropriations, House Appropriations, and House Finance Committees.
“I am here today to update you on the Commonwealth’s revenues for the fiscal year that ended on June 30. And it’s good news. Really good news,” he said, according to prepared remarks of the Wednesday speech.
“All of our major general fund revenue sources exceeded their forecasts. Our payroll withholding and our sales taxes together account for 71 percent of revenues, and they’re the best indicator about current economic activity. Together, these two categories grew 6.4 percent this past fiscal year. Revenue from personal income taxes—up 4.7 percent. Revenue from sales taxes—up 12.4 percent. Revenue from the recordation fees you pay when you buy a house—up almost 41 percent, a reflection of our strong housing market. And revenue from ABC profits—up a remarkable 29.4 percent,” Northam said.
“These tremendous results are among the best Virginia has ever delivered—and it’s thanks to the hard work of millions of workers across Virginia; entrepreneurs and employers in the private sector, and everyone in this room,” he said.
Northam noted that several previous joint addresses had been done in virtual meetings of the legislators, and credited the “incredibly effective” COVID-19 vaccines with allowing the legislature and Virginia to open back up for business. He warned that people needed to continue to get vaccinated due in part to the increased risk from the Delta variant.
He listed financial precautions taken at the beginning of the pandemic, including freezing new state spending and hiring, saying they protected Virginia from the drastic measures other states took including layoffs and borrowing money. He also noted that Virginia is now able to increase its spending, including on free community college, broadband, early childhood education, pay raises for teachers, rail infrastructure, and health departments. Northam said the Commonwealth is on track to have nearly 15 percent of the budget in reserves by the end of his term. He also highlighted spending from federal relief including the American Rescue Plan Act.
He discussed Virginia’s continued economic recovery: “The topline is this: we forecast our total revenue collections to grow 2.7 percent. We based this on the conservative recommendations of experienced economists, and Virginia business leaders. This was the right and prudent course. Instead, revenues soared 14 percent—and we can all celebrate that. That tells us all that what we’ve been doing is working—making targeted investments for the future, while helping people get through the pandemic. Revenues are exceeding official forecasts, even during a pandemic.”
Northam repeatedly highlighted how Virginia is standing out compared to other states that are struggling and highlighted CNBC’s rating of Virginia as the best state to do business.
“We have laid out a path for economic prosperity, and it’s working,” he said. “Virginia is the best state in the best nation in the world. I am grateful to all of you for the work we have done together to benefit Virginians. And I am grateful to every Virginian who has played a part in making our Commonwealth the best place to live and work.”
Republicans have responded to Virginia’s historic surplus with calls for tax cuts.
In May, Delegate Joseph McNamara (R-Roanoke) questioned the sound fiscal management explanation for the surplus in a Roanoke Times op-ed. McNamara argued that Virginia’s General Fund revenue is systematically under-forecasted across administrations.
“It is desirable for administrations to under forecast revenues, as it allows them to issue the press release: ‘Virginia ends year with $[fill in the blank] billion surpluses’—the implication is usually that the surplus was generated by ‘strong fiscal management.’ However, nothing could be further from the truth,” he wrote.
In July, McNamara told The Virginia Star that although Virginia’s economy is good, the surplus reveals that FY 2021 revenue was under-forecasted. He said that led to higher-than-necessary taxes in a year where Virginia businesses struggled.
GOP gubernatorial candidate Glenn Youngkin has campaigned on a pro-business platform, saying he would help get Virginia out of the ditch – a tough sell in summer 2021 with the successes touted by the Democratic administration. But where Northam is highlighting progressive budget bills and investment, Youngkin is highlighting potential tax relief.
In July he called for using $4.1 billion in American Rescue Plan funds and the surplus for two categories focused on taxpayers, families, jobs, small business, and broadband.
“Our economy has fallen behind, jobs have come back slower, and our cost of living is way too high,” Youngkin said.
He’s also highlighting statistics about Virginia’s economy that aren’t as rosy as the revenue or the CNBC ranking.
“BREAKING: Virginia ranks 40th in the country in recovering jobs lost since the start of the pandemic,” a Youngkin campaign email said Friday, linking to a Republican National Committee page showing Virginia has only recovered 60.7 percent of jobs lost during the pandemic.
“According to newly released data for July from the U.S. Department of Labor, Virginia is far behind most of the country when it comes to recovering the number of jobs it lost during the pandemic,” the email said.
– – –