How much of his education, health and economic development agenda can Democratic Gov. Terry McAuliffe get through a Republican-dominated General Assembly already pushing back? (Illustration by Doug Thompson)
Election Day did Terry McAuliffe no favors. Heading into an all-important General Assembly session, the Democratic governor faces a Republican-held legislature that has no reason to compromise after midterms turned ugly and the GOP emerged victorious.
As is true for all Virginia governors at midterm, the stakes are high for McAuliffe going into the 60-day session, which begins Jan. 13. He will introduce his first budget — a two-year spending plan and the only one he will remain in office long enough to see implemented because the state’s governors can serve only one four-year term. McAuliffe was scheduled to unveil his proposed budget on Dec. 17, after this magazine went to press.
Given the roughly $550 million budget surplus, Democrats are optimistic that McAuliffe’s agenda at least will shape the discussion during the session. That agenda likely will include a significant funding boost for public education, another attempt to expand the state’s Medicaid coverage gap — or at least nudge it in the right direction — and a package of gun control ordinances likely to die in a majority-Republican committee.
“As the old saying goes, ‘Governors propose and legislators dispose,’ ” says Del. Chris Jones, R-Suffolk, chairman of the House Appropriations Committee.
History is not in McAuliffe’s favor, says Stephen Farnsworth, a University of Mary Washington professor and political analyst. Republican-leaning lawmakers have demonstrated less willingness to work with Democratic governors in recent years, he says. The growing gulf is, in part, a consequence of gerrymandering districts into one-party dominance. Voting party line is the only surefire way to get re-elected.
“It’s very hard to get a compromise when the numbers of moderates in Richmond shrink with each legislative session,” Farnsworth says.
The governor also surely will be campaigning for his longtime friend and presumptive Democratic nominee Hillary Clinton. This politicking no doubt will affect the tenor of the session, says Bob Holsworth, a political analyst.
Until then, McAuliffe’s got his own battles to fight in January and February. Below, we examine four issues expected to dominate the upcoming session.
How much of a funding bump will K-12 education receive?
Illustration by Doug Thompson
Since 2007-2008, only six states have cut funding for public school primary and secondary education more deeply than Virginia, says Michael Cassidy, president of The Commonwealth Institute, a Richmond-based think tank that focuses on how public policy impacts moderate- and low-income Virginians. Because of the way the state’s funding formula works, the cuts hit rural and poor districts the hardest.
The formula, called the composite index, calculates a locality’s ability to fund its students’ educations by taking into account several factors. The most heavily weighted is real estate value, which determines property tax revenue. During the recession, in particular, that weighting hurt cities such as Richmond, Norfolk and Petersburg, where much of the property is state- and federal-government owned and, therefore, tax-exempt. Communities with greater property tax bases were hammered by the bursting of the housing bubble and property tax revenue plummeted. Excluding need or poverty in the formula is problematic, Cassidy says.
Consider Richmond, and Chesterfield and Henrico counties. Since 2009, the state’s per pupil expenditure in each district has declined, but Richmond Public Schools has seen the steepest drop off: RPS, 17.4 percent less; Henrico, 13.8 percent less, and Chesterfield, 14.4 percent less.
“State budget shortfalls became local school boards’ problems,” Cassidy says.
The result is growing inequity from division to division, says Sarah Gross, president-elect of the Virginia Congress of Parents and Teachers. To start, she says, additional funding could add much-needed support staff in the schools, technology in more classrooms, or at least broadband Internet access in all buildings.
“We want to build this robust education system, but we haven’t put the dollars behind it,” Gross says.
Last summer, McAuliffe addressed a joint meeting of the House and Senate finance committees and said that simply restoring education funding to previous levels won’t be enough.
“I intend to include significant forward-looking investments that will modernize our education system and prepare students to thrive in the economy of 2025, 2050 and beyond,” McAuliffe said.
Jones, chairman of the House Appropriations Committee, says before any new resources are allocated to education, lawmakers have to determine how much it will cost just to maintain current service levels. Early estimates indicate it would cost more than $400 million, he says. Combined with the increasing cost of Medicaid (sans expansion), the state is on the hook for about $1.5 billion just to keep up, he says.
Given that, “it’s going to be very tough” to increase education funding,” says Del. R. Steve Landes, R-Albemarle, chairman of the House Education Committee.
To lessen the burden of state cuts, Landes says lawmakers have recommended localities consolidate administrative costs or share services. Because localities aren’t faced with the rising cost of Medicaid, he adds, they’re in a better position to do that.
Can Medicaid expansion gain traction in a Republican-held legislature?
Illustration by Doug Thompson
In 2014, the state teetered on the brink of a Washington-style shutdown after the governor sought to push Medicaid expansion through a Democrat-controlled Senate during a special budget session in April. A Democratic senator whom McAuliffe counted as a vote in favor resigned abruptly amid accusations that Republicans had dangled a plum state job in front of him. (In the clamor, the legislator bowed out of the running for the job.) In a few days of drama and intrigue, Republicans succeeded in circumventing the governor’s move.
This year, with Republicans in control of both chambers, there’s no obvious path for the governor to expand the federal program under the Affordable Care Act. That means an estimated 400,000 people who earn too little to purchase insurance in the marketplace, but too much to enroll in Virginia’s Medicaid program or to qualify for tax credits, will remain uninsured.
But just because Republicans control both chambers doesn’t mean Democrats are giving up on expansion, says Sen. Donald McEachin, D-Henrico, and chairman of the Senate Democratic Caucus. The party count can be misleading, he says. “It’s 21-19 from a partisan perspective, but the notion of insuring these 400,000 people has always had bipartisan support in the Senate,” he says.
A 20-20 vote in the Senate would leave Democratic Lt. Gov. Ralph Northam with the tiebreaker. Still, expansion faces certain death in the House, where Republicans outnumber Democrats, 66 to 34.
John O’Bannon, R-Henrico, chairman of the House Health Committee, does not support expansion. He and other House Republicans, point to a November Joint Legislative Audit and Review Commission study that highlighted inefficiencies in Virginia’s current $8 billion Medicaid program. Among the report’s findings, the state spent $38 million on ineligible recipients during the last fiscal year because some recipients’ income and assets weren’t verified.
Annual reforecasting of the system, in which the state accounts for new enrollees and the rising cost of health care, estimates the program will cost the state an additional $1 billion. As it stands, the program is projected to double in cost every eight years. Expansion would only increase the cost, O’Bannon says.
Republicans also are skeptical of the availability of federal incentive money in place to entice states to expand coverage. Through 2016, the feds have pledged to cover 100 percent of the expansion costs. After 2020, that share drops to 90 percent of the cost, and the state would have to pay the remainder. Republican legislators worry that if the incentive money disappears, the state will be left holding the bill.
Cassidy, of The Commonwealth Institute, says it’s unlikely the feds would renege on the deal, pointing out that Congress hasn’t once touched the money set aside for the program during its recent heated budget debates. Rather than cost the state money, he says, expansion would free up as much as $250 million annually to spend on other initiatives.
“It’s going to be a big debate, and lawmakers need to be aware of the fiscally irresponsible course they’re currently on,” Cassidy says.
Julian Walker, a spokesman for the Virginia Hospital and Healthcare Association, says the state’s hospitals were facing mounting financial challenges long before the Affordable Care Act. Sequestration, which enforces across-the-board federal spending limits, cost
hospitals $1.5 billion in the last five years, he says.
In urban and suburban settings, 60 percent of patients are covered by Medicaid or Medicare. In rural hospitals, that percentage rises to 75 percent. Hospitals are only compensated 66 cents for every $1 worth of service they provide for Medicaid patients.
“For the past couple of years, the realities of the situation have been obscured by some of the white noise that’s existed surrounding the broader healthcare policy debate,” Walker says.
The hospital and health care association plans to make specific policy recommendations ahead of session, he says.
Will lawmakers re-invest in the state’s colleges and universities?
Illustration by Doug Thompson
Replenished state coffers are a reason for encouragement for advocates of higher education, but the state’s universities and colleges may not receive as big a piece of the pie as they’d like when the ink is dry on the next two-year budget.
Higher education has seen funding cuts in seven of the last nine years, says Dan Hix, finance policy director for the State Council for Higher Education. Institutions offset those cuts by raising tuition and fees, meaning students pay the difference. Last year, the average tuition increase at state universities was 6 percent, Hix says. Average cost of attendance — including tuition, fees and room and board — topped out at $21,228 for in-state students who enrolled at a four-year institution in the 2015-16 school year.
Simultaneously, state support for financial aid has dropped. In 2008-2009, Virginia met about 60 percent of student requests for aid. Last year, that percentage dropped to about a third of requests, says Jared Calfee, executive director of Virginia21, a nonprofit that lobbies on behalf of millennials. Cutting aid may save money in the short run, but reducing the line item — and, by extension, access to higher education — isn’t a smart decision for the state in the long run, Calfee says.
“Investing in higher education creates more jobs, it creates a broader workforce and base of workers, creates a lesser dependence on the social safety net, so you’re spending less on the people who are struggling to find work,” Calfee says.
Currently, Virginia funds about 47 percent of the annual cost of attendance for in-state students, says Peter Blake, director of the State Council for Higher Education. A state tuition policy dating to 2004 sets a goal of paying for two-thirds of the cost of an undergraduate education for an in-state student, with students and families picking up the remainder.
“Will we ever get back to that? I don’t know,” Blake says. “I certainly think if we’re able to get the kind of funding into colleges and universities that the council has recommended, then we will see the smallest tuition increases in 15 years.”
Sen. Creigh Deeds, D-Bath County and a former Democratic gubernatorial candidate, says leaders on both sides of the aisle need to have a “frank discussion” about the state’s commitment to higher education. “Unless we put a chunk of money into student aid, we’re basically denying the American dream to people,” he says.
Has McAuliffe done enough to improve the state’s economy?
Illustration by Doug Thompson
McAuliffe made economic development, or, as he calls it “Building the New Virginia Economy,” his mission from Day One and he’s seeing encouraging results.
His administration boasts the creation of more than 40,000 new jobs and $9 billion in investment around the state. Unemployment has sunk to just above 4 percent, as low as it has been since the recession. The governor’s lengthy sales pitch trips abroad may be paying off too; the Port of Virginia tallied record cargo activity in October.
The news isn’t all good. Since 2013, Virginia has tumbled down a Forbes ranking of business-friendly states.
Site Selection magazine ranked the state 12th in its November 2015 list of states with the best business climate, a fall from its 2013 and 2014 perch of 10th-best. Sequestration sucked away valuable defense spending and government contracts that have long buoyed the state’s two economic powerhouses: Northern Virginia and Hampton Roads.
Deeds says those areas, along with the Richmond region, are best equipped to bounce back and thrive because of their large populations, universities and colleges, and transportation networks. It’s rural districts like his that face an uphill battle in attracting new investments. “McAuliffe has worked very hard to spread the love around,” he says.
Landes, who also sits on House Appropriation’s Agriculture, Commerce, Technology and Natural Resources subcommittee, says that despite the governor’s efforts, the state “hasn’t seen the results” it needs to see under the current administration. Small business growth has been promising, he says, “but we’re not seeing the big employers that we’d like to see expand or come into the state.”
The state’s economic growth still lags behind the national average, says Paul Logan, a spokesperson for the Virginia Chamber of Commerce, the largest business advocacy group in the state. In 2013, the organization developed a policy plan called Blueprint Virginia, which outlines steps lawmakers can take or initiatives they can promote to maintain a business-friendly environment.
One of the most important challenges in the next decade will be workforce development and training, says Ryan Dunn, the executive director of the chamber’s political action committee. The combination of retirements and an aging workforce means existing employers will need an estimated two million new workers in the next decade, Dunn says. Giving community colleges incentives to equip students with skills that match the needs of employers in their regions will help the commonwealth stay competitive, he says.
“It’s really the most important factor that determines whether a business decides to stay or expand,” Dunn says.
Who to Watch
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Bob Marshall: The Republican from Manassas, in 2014 introduced a bill that, if passed, would have allowed for discrimination against LGBT on the grounds of religious liberty. Some observers expect the issue to arise again this session in response to the Supreme Court decision legalizing same-sex marriage nationwide. (provided photo)
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Tommy Norment: The Republican senator from Williamsburg was re-elected Senate majority leader by his peers in November. He also bucked the wishes of some in his party by vying for chair of the Finance Committee, which develops the Senate’s budget package. He will co-chair the committee, meaning he holds two of the most powerful positions in the legislature. (provided photo)
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Ralph Northam: In November, the Democratic lieutenant governor officially announced his 2017 bid to replace McAuliffe. A tie vote in the Senate on a hotly contested issue (See: Medicaid) could cast Northam, a pediatric neurologist by trade, into the spotlight at a key moment. (provided photo)
Andy and Barbara Parker
The couple’s daughter, Alison, was shot and killed on live television over the summer while working for a Roanoke TV station. Since then, they have lobbied fiercely for state politicians to vote in favor of gun control measures during the upcoming session. One lawmaker took exception to online comments Andy made this past fall and filed a police report citing them as a threat. The governor publicly backed Parker, who later apologized to the lawmaker.