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The Virginia State Capitol.

State employees would receive an extra boost in pay under a tentative agreement that General Assembly budget negotiators were close to completing on Thursday night.

The 1 percent increase — a combination of across-the-board raises and merit pay — would go on top of the 2 percent raise and 2 percent merit pay already scheduled to take effect on July 1 for state employees. It would eliminate a one-time, 1 percent bonus that Gov. Ralph Northam proposed.

The tentative deal also would add 1 percent in salary for college faculty and state-supported local employees, who already are due 2 percent raises under the current two-year budget.

A conference committee of the House of Delegates and Senate was racing to complete work on the two-year state budget in time for the General Assembly to adjourn on Saturday, but the spending plan won’t be ready 48 hours in advance as required under both chambers’ rules. Lawmakers can waive the rule if they choose.

The emerging budget plan would partially restore funding for “at-risk” students in Richmond and other school divisions with high concentrations of poverty, a primary condition of the Virginia Legislative Black Caucus in backing emergency tax legislation more than a week ago.

The plan would restore about two-thirds of the $36 million that Northam sought in additional “at-risk add-on” funds for eligible school divisions. The House budget had cut the new money entirely, instead proposing $28 million to expand use of Virginia Lottery money for all school divisions. The Senate had included $21.4 million of the governor’s funding request.

Under the tentative agreement by the budget conference committee, the state would provide an additional $11 million this year and more than $14 million next year, fully funding the governor’s request in the second year.

However, the plan also would drop the increased lottery funding proposed by the House. The reversal would help some school divisions, such as Richmond and Petersburg, that benefit from the “at-risk add-on” funding. It would mean less for some large school divisions, such as Chesterfield County, that would have received more from additional lottery funds.

Richmond-area schools

Richmond would gain $1 million and Chesterfield would lose $1 million under the revised proposal. Petersburg would receive about $330,000 more, but the proposal would reduce net funding by $336,000 in Hanover County and $305,000 in Henrico County.

About 40 percent of lottery money goes to school divisions now without restriction or any requirement for local matching money. Divisions that receive at-risk funding will have to provide local matching funds.

The budget includes an additional 2 percent raise for teachers — on top of 3 percent already in the budget adopted last year — that would take effect Sept. 1 to allow localities more time to allocate local money to match the state funding, under the tentative agreement.

However, the budget plan would include less money than Northam and the House had proposed for schools to hire additional counselors as recommended by a school safety task force — about $12 million of the $36 million the governor requested in his budget proposal in December.

In addition to more money for education, the tentative budget agreement includes additional funding for the Virginia Housing Trust Fund, eviction diversion initiatives and financial aid for disadvantaged students of public colleges and universities. House Democrats, led by the black caucus, set those priorities in return for their support of the emergency tax policy package on Feb. 11. That legislation enabled the state to begin processing income tax returns in conformity with new federal law.

Democrats initially blocked passage of the emergency tax legislation, which required 80 percent approval in each chamber to take effect as soon as the governor signed it, rather than on July 1, two months after the state’s tax filing deadline. They helped to approve the package after House Appropriations Chairman Chris Jones, R-Suffolk, promised to reconsider spending priorities that Democrats described as “racial equity” issues.

Higher education

The biggest hurdle for budget negotiators has been funding for higher education that would strike a balance between tuition and financial aid.

The tentative agreement would provide $56.4 million in state funding for higher education institutions that agreed to freeze tuition next year, nearly $11 million more than the House originally had proposed under a plan that would relieve pressure on financial aid. The House had cut an additional $15.5 million in financial aid proposed by Northam and supported by the Senate, but would restore the money under the tentative budget deal.

House budget leaders have estimated the additional state funding would save students and their families 4 to 5 percent on tuition. They would pay for it in part by eliminating a proposed $34 million down payment on future cash incentives to Amazon for creating jobs at its new headquarters planned in Arlington County.

Taxing factors

The budget negotiations have been shadowed by the tax policy debate and a scandal that enveloped Northam. It erupted over a racist photo on his 1984 medical school yearbook page and his admission that he had blackened his face to impersonate singer Michael Jackson in a dance contest the same year while in Army medical training in Texas.

The governor quickly signed the emergency tax legislation. It set aside about $1 billion in anticipated revenues from federal tax reforms to return to taxpayers as one-time refunds this year, as well as through tax reforms next year and a “taxpayer relief fund” to hold any unspent revenues from the windfall.

As a result, Northam lost money he had proposed to use in his budget. The governor hoped to refund the unused portion of a tax credit for low-income working families, boost the state’s financial reserves and spend on such priorities as affordable housing, access to broadband telecommunications networks, and programs to improve water quality in the Chesapeake Bay watershed.

The House and Senate have relied instead on about $1 billion in additional state revenues from economic growth and unexpected savings to pay for mandatory and high-priority spending initiatives. Their budgets also funded economic development commitments, broadband access and other programs the governor had proposed to finance with “limited time” money from temporary provisions of the federal tax law.

As a result, the House and Senate budgets cut some of the governor’s spending priorities. The cuts angered Democrats, especially members of the black caucus who already were unhappy with Northam and Attorney General Mark Herring. The attorney general acknowledged that he, too, had appeared in blackface — at a University of Virginia fraternity party in 1980.

Del. Luke Torian, D-Prince William, the top-ranked Democrat on the House Appropriations Committee, declined to meet with Northam last week for a traditional breakfast session with budget negotiators at the Executive Mansion. During the meeting, budget negotiators heard about the governor’s spending priorities, which focused on “equity issues” raised by the black caucus.

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