House Appropriations Receive Revenue Report

Members of the House Appropriations Committee met virtually Monday and heard from Commonwealth Secretary of Fiance, Aubrey L. Layne, Jr., regarding the May revenue report for Fiscal Year 2020. Layne told committee members that May is generally a month where Virginia sees an increase in tax collections because individual income tax is due May 1. However, with Governor Northam extending the income tax payment deadline to June 1, it will be necessary to asses the June collections to get a better picture to the close of FY 2020.

Layne added that the COVID-19 pandemic, and the economic shutdown to mitigate the spread of the virus, did negatively impact the final months of the fiscal year. He added that revenue collections will be less than $billion below the official forecast made to lawmakers earlier in the fiscal year.

Highlights from Secretary Layne's report include:

Net Individual Income Tax (70% of general fund revenues):  Through May, collections of net individual income tax fell 3.6 percent from the same period last year, trailing the annual estimate of 1.3 percent growth.  Performance in each component of individual income tax is as follows: 

Individual Income Tax Withholding (62% of general fund revenues):  Collections of payroll withholding taxes fell 13.0 percent in May.  Two fewer deposit days accounted for a large part of the decline; however, there was a broad-based decrease in the number of firms paying.  Tax withholding collections decreased 4.4 percent during April and May combined.  Year-to-date, collections have grown 3.1 percent, trailing the annual estimate of 4.7 percent growth.   

Individual Income Tax Nonwithholding (17% of general fund revenues):  May is typically a significant month for collections in this source, with final payments for tax year 2019 and the first estimated payment for tax year 2020 both due at the beginning of May.  This year, the payment date has been extended to June 1, so it is unclear how many payments have been delayed.   

Collections in nonwithholding were $500.1 million compared with $764.9 million in May of last year, a decline of 34.6 percent.  This decline was anticipated and consistent with our projections.  Year-to-date, collections fell by 22.6 percent, trailing the annual estimate of a 4.3 percent decline.   

Individual Income Tax Refunds:  The Department of Taxation issued $182.0 million in refunds in May, compared with $144.6 million in May of last year, an increase of 25.9 percent.  For the filing season, TAX has issued 2.3 million refunds, about the same number as last year.  On a fiscal year basis, TAX has issued $1,695.9 million in refunds through May compared with $1,643.4 million through the same period last year. 

Sales Tax (18% of general fund revenues):  Collections of sales and use taxes, reflecting April sales, fell 12.5 percent in May.  The month represents a full month of reduction in sales due to numerous store closings during the COVID-19 pandemic.  On a year-to-date basis, collections of sales and use taxes have risen 5.4 percent, trailing the annual estimate of 7.4 percent growth.   

Corporate Income Tax (5% of general fund revenues):  May is not typically a significant month for collections in this source, as final or extension payments are mainly due only from retailers who usually have a January 31 close to their fiscal year.  Such payments vary significantly from year to year.  Collections of corporate income taxes were $47.2 million in May, compared with receipts of $2.5 million in May of last year.  The main reason for the increase is that last year contained about $25 million in prior tax year refunds.  

To view the full report from Secretary Layne, please click here.

United States Senate HELP Committee Discusses School Reopening

The Senate Health, Education, Labor and Pensions Committee heard from education leaders from around the country during a hearing to discuss plans to safely reopen schools on Wednesday, June 10, 2020. The hearing was conducted at a time the Senate is weighing how best to grapple with the continued effects of the Coronavirus pandemic on state and local budgets due to the economic shutdown. 

Last month, the United States House of Representatives passed the $3 trillion HEROES Act that included funds to assist state and local governments with their budgets. The Senate has yet to take up debate on the HEROES Act and according to Senate Majority Leader Mitch McConnell, the bill will not see any action until after Congress' July 4th recess.

Education leaders informed the Senate committee of the challenges they anticipate once they resume in-person classes. Senators were provided with information outlining the significant budget impact that reopening will have on school divisions. With deep budget cuts in state and local government programs, schools are grappling with reopening schools without the necessary resources to properly transition back to in-person instruction. Many districts are facing decisions regarding furloughs of employees and how best to provide services to students.

AASA, the School Superintendents Association, released estimates that districts would incur nearly $1.8 million in costs to meet federal health guidelines, from $640 for no-touch thermometers to $448,000 for additional custodial staff; that is just for an average school district of about 3,700 students. Additionally, the American Federation of Teachers on Wednesday released a cost analysis estimating that schools would need $116.5 billion for instructional staff, distance learning, before- and after-school care and transportation, while the National Education Association estimated that without federal relief, schools would lose 1.9 million education jobs.

If you have any questions about the topics discussed during the Senate hearing, please contact VSBA Government Relations Specialist, J.T. Kessler, at jason@vsba.org. To view the entire hearing, click here.

May Revenue Numbers Released

General Fund revenue collections fell 20.6 percent in May, according to information released by the office of Virginia Governor Ralph Northam. This number was slightly better than expected. This is primarily due to delaying the individual tax due date to June 1, and the impacts of the COVID-19 pandemic on payroll withholding and retail sales. 

May is typically a significant month for revenue collections. In addition to regular collections of withholding and sales taxes, estimated and final payments for individuals were due May 1. This year, the Governor authorized any individual and corporate income tax payments due between April 1, 2020 and June 1, 2020 to be due on June 1, 2020. The extension applies to final payments and extension payments for taxable year 2019, and the first estimated payment for taxable year 2020. Therefore, June receipts will be required to properly assess total fiscal year revenues.

On a fiscal year-to-date basis, total revenue collections have declined by 1.2 percent, trailing the annual forecast of 3.1 percent growth. To attain the current official revenue forecast, June collections must be $3.3 billion, compared with $2.4 billion collected in June of last year.

Collections of payroll withholding taxes fell 13.0 percent in May. Collections of sales and use taxes, reflecting April sales, fell 12.5 percent in May. The month represents a full month of reduction in sales due to numerous store closings during the COVID-19 pandemic. 

On a year-to-date basis, collections of payroll withholding taxes—62 percent of General Fund revenues—increased 3.1 percent, trailing the annual forecast of 4.7 percent growth. Sales tax collections advanced 5.4 percent on a fiscal year-to-date basis, also trailing the annual forecast of 7.4 percent growth. On a fiscal year-to-date basis, total revenue collections fell 1.2 percent in May behind the annual forecast of 3.1 percent growth. Collections in June must total $3.3 billion to attain the forecast. Collections in June of last year were $2.4 billion, and June collections are anticipated to be greater than the previous year due to delayed tax payments due June 1.

The full report is available here. 

Governor Northam Announces GEER Funding for Schools

Virginia Governor Ralph Northam announced the Commonwealth's schools will receive $66.8 million through the federal Governor’s Emergency Education Relief (GEER) Fund to expand distance learning opportunities, fund services for students disproportionately impacted by loss of class time, and provide financial assistance to higher education students and institutions impacted by the COVID-19 pandemic.

The GEER Fund was authorized by Congress through the Coronavirus Aid, Recovery, and Economic Security (CARES) Act. The fund provides states the flexibility to determine how best to allocate the emergency assistance to meet their educational needs. 

• Governor Northam is distributing $43.4 in GEER funding for the following PreK-12 priorities:
• $26.9 million to support short-term and long-term initiatives expanding high-speed internet access to all communities in the Commonwealth, including providing laptop computers and Mi-Fi devices for students without home internet access.
• $10 million to expand early childhood education and child care programs in the Commonwealth, especially for children with academic and social-emotional needs.
• $3.5 million to support the expansion of the Virtual Virginia online learning program to provide content for elementary and middle school students; allow teachers in all school divisions to use the platform to create, edit, and share content as well as provide personalized virtual instruction for all students; and expand the Virtual Virginia Professional Learning Network, in partnership with the Virginia Society for Technology, to ensure that educators and technology-support personnel have the capacity and skills to meet the demand for quality online learning; and
• $3 million to cover unfunded costs for the continuation of school-based meals programs while schools remain closed, including hazard pay for school nutrition staff.

   To read the full release of the Governor's announcement, please click here. If you have any questions regarding the GEER fund, please contact VSBA Government Relations Specialist, J.T. Kessler, at jason@vsba.org. 

Governor Northam Announces Guidelines for Reopening Schools

On Tuesday, June 9, 2020, Virginia Governor Ralph Northam announced plans for the reopening of Virginia's public K-12 schools along with guidance for divisions to follow in the planning process. See the links below to view the guidance documents from the Governor's Office, as well as a reopening guide from the Virginia Department of Education.

If you have any questions, please contact VSBA Government Relations Specialist, J.T. Kessler, at jason@vsba.org.

Recover-Redesign-Restart: A comprehensive plan that moves Virginia Learners and Educators FORWARD

Phase Guidance for Virginia’s Schools

Order of the State Health Commissioner Regarding School Reopening Mitigation Plans