Virginia Facing $1 Billion Budget Shortfall

Date: May 21, 2020

Possible Increase in Employment Taxes

Secretary of Finance Aubrey Layne announced at two legislative committee hearings that Virginia’s revenue collections were down $700 million in April which is the first month to include impacts of the coronavirus.  During his presentation, Secretary Layne estimates Virginia will face a $1 billion shortfall this fiscal year which ends on June 30, 2020. 

There were positive signs that Virginians are still spending money despite closures statewide. Sales tax collections for grocery, ABC, and online sales were near the levels expected, according to the report.  Layne said Virginia officials will watch consumer spending as a key indicator for when and how the economy begins to turn around.

Also, more than 400,000 Virginians have been approved for unemployment benefits since the pandemic landed in Virginia.  Secretary Layne estimated the real unemployment rate at around 10% statewide while the national average is 15%. 

Commissioner Ellen Hess of the Virginia Employment Commission gave more detail regarding Virginia’s unemployment fund.  Commissioner Hess said the strain on the state’s fund for paying out unemployment claims remains significant.  “The VEC anticipates that we will need to borrow to pay benefits during the third quarter,” said Hess, referring to the stretch from July through September.

“Unless Congress acts, these funds will have to be repaid by employers during the first quarter of 2021,” Hess said.  Senate Minority Leader Tommy Norment asked Commissioner Hess about the potential tax increase to employers and Commissioner Hess responded: “It is going to be a significant impact if Congress does not act.”

NFIB’s Virginia office is preparing for what’s ahead in a possible Special Session in late summer or early fall to address issues related to COVID-19.  We’ll be fighting for COVID-19 liability protections; opposing drastic increases to unemployment insurance and workers’ compensation, and pushing against one-size-fits-all mandates that disproportionately burden small businesses such as paid sick leave.

 

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