Fine sentiments, sure. And the coronavirus rapidly made them worthless.
Virginia’s budget will have to be changed — perhaps in ways few members of the General Assembly could have imagined even a week ago. State Sen. Steve Newman (R-Bedford) urged his colleagues to delay passing the budget for a few days to give lawmakers an opportunity to get a better handle on the evolving crisis.
Howell opposed the idea, saying any delay would give the public the wrong message.
Howell also said the Senate would examine and propose options to Gov. Ralph Northam (D) in advance of the April 22 veto session.
But those may not be enough.
On Monday, Senate Minority Leader Thomas K. Norment (R-James City) sent a letter to Northam urging him to call a special session. Among the reasons: The revenue estimates that form the budget’s foundations were produced in 2019 — long before most Virginians had ever heard of a coronavirus.
Those forecasts showed steady increases in state revenue through 2022.
Norment wrote, with his usual understatement, those assumptions “may no longer be operative.”
In one example of the new costs facing state and local governments, Norment said he believed the costs of closing the state’s public schools “will cost $444 million.”
“Those additional, unanticipated expenses,” Norment said, “as well as revenue projections that may now be too robust necessitate a fresh look at our finances.”
The question is how quickly the state’s economy shrinks. Sales tax revenue from panic buying is likely to offer some cushion to state and local balance sheets.
But that revenue — and a host of others, from gas taxes to local meals taxes — are also likely to crater in the face of orders to stay at home, avoid restaurants, bars, gyms and more.
And that’s all before the predictable rise in unemployment among workers in those same industries.
Northam’s Finance Secretary, Aubrey Layne, said the “key to the general fund revenue forecast remains the fourth quarter when individual final payments [for state income taxes] are due on May 1.”
That might still be true, if for no other reason than those tax returns reflect 2019 income — pre-coronavirus.
And this assumes Virginia doesn’t delay final, quarterly or other tax-filing deadlines, as Maryland has done. Those moves, while providing a short-term boost for individuals and businesses, could further disrupt the state’s budget.
Then again, such a disruption may be the least of the commonwealth’s concerns.
According to Allianz Capital Chief Economic Adviser Mohamed El-Erian, things are pretty grim at the macro level:
“We are having a massive economic sudden stop,” El-Erian said. “It’s the sort of thing that happens in fragile states, it doesn’t happen economy wide and it certainly doesn’t happen worldwide, but that’s what is occurring right now."
As businesses face ongoing costs with very little cash flow, a liquidity problem could fast become a solvency problem.
That is something El-Erian said should be avoided at all costs.
Can a special legislative session make a difference? Against the larger economic issues El-Erian described, certainly not.
But one will have to be called sometime between now and July 1, the beginning of Virginia’s fiscal year, to bring the budget more in line with evolving economic reality.
It may mean spending cuts, layoffs, tax and fee hikes and tapping the state’s rainy-day fund.
What isn’t an option? Leaving the current plan in place and delaying those brutal spending choices to 2021 — an election year that is already shaping up to be one for the history books.