Decision Time in Virginia: Three Things to Look for in the Governor’s Proposed Budget

by Mitchell Cole

November 9, 2015

Cover Photo Credits

Now that voters in Virginia have cast their ballots in last week’s elections, policymakers are turning their eyes towards the next session, when lawmakers will write a completely new budget for the next two years.

And while Republican control over both chambers makes it much more difficult for him to achieve key parts of his agenda, Governor Terry McAuliffe still gets the first chance at starting this conversation. He’s scheduled to present his proposal – the first in his term – just a few short weeks from now, on December 17th.

Here are three key aspects of his proposal that will be sure to create discussion once the General Assembly starts its work.

Medicaid Expansion

During the 2014 session, the General Assembly was at loggerheads for months over whether or not Virginia should opt in to a federally financed expansion of its Medicaid program to cover families with incomes up to 138 percent of the federal poverty line. The governor still touts this expansion as one of his main policy goals, requiring lawmakers to appropriate these federal funds through the state’s budget.

While this expansion will be a feature of his proposal, the governor has a lot of other choices to make in how he expands Medicaid. He could propose simply expanding the current program, or he could seek to gain support in the legislature by incorporating cost-sharing provisions or a work-search requirement.

The governor also has a choice about what to do with the savings the state will receive by expanding Medicaid. Right now the state pays for a number of programs, like community-based mental health services, health coverage for prison inmates, and indigent care, the costs of which would be reduced if more individuals have health coverage.

Because the federal government has promised to pay for all of the expansion costs in the first three years, the state would be able to capture significant savings, which could be used to finance other services. Another alternative, however, would be stashing these savings away in a trust fund to help pay the state’s share of the expansion costs in future years.

Education Funding

Another important aspect of the governor’s budget proposal will be how much money he directs towards the state’s school divisions.

Virginia’s schools still are making do with less state funding than they had prior to the recession, after taking inflation and growing enrollment into account. The governor has signaled that he plans to take steps to expand this funding, but the magnitude of this increase remains to be seen.

Also unclear is how the governor will distribute these new funds. His options include additional sales tax distributions to schools, boosted funding for at-risk students, higher funded salaries for school staff, or funding additional support staff, among many others. Each of these approaches will impact schools in different ways.


Lastly, the governor also has the opportunity to make significant reforms to the state’s tax code while looking to help pay for his spending plans. These additional revenue-raisers could include higher tax rates, closed tax loopholes, new sources of federal funding, or additional fees for services.

Also important are the state’s revenue projections. An overly cautious projection may prevent lawmakers from adequately investing in the services that the state needs. On the other hand, an overly optimistic forecast could mean the state would have to impose draconian cuts once the budget is already in place, as we saw in 2014.

The administration is currently making these difficult policy choices, and many others. What the newly elected General Assembly chooses to do in response remains a question for next spring.

Mitchell Cole is a Master’s candidate in Public Policy at the College of William & Mary and an Associate Editor of the William & Mary Policy Review.