by Dick Hall-Sizemore
To deal with the virus-created budget crisis in the short term, the Northam administration has announced sort of a “time out.” According to the Richmond Times-Dispatch, the plan will consist of two primary components: freezing all new spending and diverting planned deposits in the cash reserve to pay for essential services in the current year.
The Governor will propose an amendment that would allow the administration to use about $600 million that had been planned for deposit in the cash reserve fund for essential operations of state government. This is not the Rainy Day fund, but money in the additional cash reserve established a couple of years ago. Under the provisions of the state constitution, the Rainy Day fund cannot be tapped “unless the general fund revenues appropriated exceed such revised general fund revenue forecast by more than two percent of certified tax revenues collected in the most recently ended fiscal year. “Therefore, the state would need to wait until a re-forecast is conducted in the late summer before counting on the Rainy Day fund.
In addition, the Governor will propose a large block of amendments restricting, but not eliminating, new spending. That will give the administration time, after the revenue picture is clearer, to decide what specific areas of the budget to cut and by how much. According to Clark Mercer, the Governor’s chief of staff, “Every item in new spending will have language attached to it that instructs state agencies they don’t have authority to spend it.” In budget parlance, that money will be unallotted. My former colleagues in DPB are no doubt in a frenzy now identifying all the new spending and preparing the appropriate amendments. That will not be easy because the legislature modified a lot of the new spending proposed by the Governor.
This is an interesting approach. The Governor has the authority to unallot appropriations after a re-forecast showing revenues being lower than expected. By attaching this language to specified appropriations in the budget bill itself, he will be limiting his flexibility next fall, because only the General Assembly can amend budget bill language.
The Governor could have instructed agencies, as he already has, to curtail all discretionary spending and that could have included new spending authorized in the budget.His asking the General Assembly to put in actual language limiting the expenditure of new funds may reflect his fear that agencies will not comply and his distrust in the administration’s ability to control agencies’ actions.
On the other hand, there is the argument that the Governor cannot legally prohibit agencies from spending any appropriations, including embarking on new programs mandated by the General Assembly in the Appropriation Act. But the reality is agencies usually take several months to get a new program off the ground; it takes time to recruit and hire new staff, for example. Therefore, there would little ground for challenging such delays. As for new spending that is an expansion of existing programs and appropriations, it could be argued that the agencies are not spending the new money in the first half of the fiscal year, but are holding it for the second half. Agencies would be put on notice that that extra revenue likely would not be there in the spring and they should not plan on it. That would make it available for budget cuts in the fall.
Another possibility is that the unallotment language being proposed by the Governor will provide him the discretion to allot those funds, or a portion of them, when he chooses. In such a case, he would preserve his flexibility while preventing agencies from spending the new money without violating the legal prohibition of withholding appropriations.
This action freezing all new appropriations will place local governments in a dilemma because they will not know how much they can expect from the state for their K-12 programs for the next school year. Of course, they may have been in the dark about that funding even without an official freeze.
It seems that part of the reasoning behind the administration’s approach is a desire to involve the General Assembly in the budget decisions more or, at least, to let the legislature think they are involved. From comments in the news reports, it seems that the Governor or Secretary Layne have been conferring with the money committee leadership. It will be interesting to see how the amendments are worded and how this all plays out.
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