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General Assembly adjourns 60-day session without a budget, special session comes next

The General Assembly left town Saturday without a budget, but it will be back soon, Gov. Ralph Northam promised.

Unable to agree even on a resolution to ask the governor to convene a special session — much less whether to expand Virginia’s Medicaid program — the House of Delegates and Senate left it to the governor to set the date and terms for their return to finish work on budgets for the current fiscal year and upcoming biennium.

“I haven’t decided a specific date,” Northam said, “but it will be sooner than later.

However, the governor made clear that he will introduce a new budget in the special session that looks much like the one that his predecessor, Gov. Terry McAuliffe, introduced in December. Medicaid expansion will be fully embedded into a spending plan that relies on hundreds of millions in state savings by using almost $3 billion in federal funding under the Affordable Care Act.

“It will include Medicaid expansion and the significant investments that the savings from expanded coverage will generate to fund key priorities like education, workforce development and salary increases for public servants, with a particular focus on men and women in law enforcement,” Northam said in a statement after the assembly adjourned shortly before 2 p.m. Saturday.

Bond ratings

The special session will occur under the watchful eye of the country’s bond-rating agencies, including S&P Global, which switched the fiscal outlook for Virginia from stable to negative last April because of concerns about its reserves and economy.

“The rating agencies are watching what we do with our budget,” Northam told reporters after the session ended.

The agencies — S&P, Moody’s and Fitch — received a briefing on the budget situation on Friday, Secretary of Finance Aubrey Layne said in an interview on Saturday.

Layne said they want to be sure the budget is structurally balanced without onetime money, reserve funds are fattened, and the state is investing in core services necessary for future growth, but he expects S&P to issue a public statement on Monday that it won’t rush to judgment while the assembly works toward a budget.

“It’s not going to be a credit issue to them at the present time,” Layne said.

House Appropriations Chairman Chris Jones, R-Suffolk, responded, “I’m very pleased to hear that because it gives us some time to work. If it were in May, that’s going to be a different story.”

Senate Majority Leader Tommy Norment, R-James City, co-chairman of the Senate Finance Committee, also welcomed S&P’s assurance that “they are comfortable with where we are in spite of the budget impasse.”

“Negotiations continue,” Norment added. “We’ll be making progress.”

Special session

The special session will focus on reconciling two budgets at least $400 million apart, but also will allow the legislature to fill empty judgeships, including a highly prized seat on the State Corporation Commission, and confirm appointments by the governor.

Northam would not say whether he will use the opportunity handed to him by the divided legislature to name his own pick to the SCC to serve out the two-year term of retired Judge James C. Dimitri, who first got the job the same way in 2008.

“I haven’t made a decision,” he told reporters. “All options are on the table right now.”

Neither the Senate nor the House would budge on approving a resolution adopted by the other to ask the governor to call them back into special session.

However, Norment offered a rare apology on the Senate floor to House Speaker Kirk Cox, R-Colonial Heights, for implying the previous day that the speaker should resign as a leader who is out of step with his House Republican caucus by supporting Medicaid expansion in the budget.

“On my comments on the speaker, if he took umbrage and was offended, I apologize,” Norment said.

However, the majority leader said his remarks had been misconstrued. Norment said he did not suggest that Cox resign, only that he would do so if he were in the same political position with his party caucus in the Senate.

“If in fact I were dramatically out of step with my caucus, they would terminate my leadership and that’s just a fact of life,” he said.

Metro funding

The House relied on 49 Democrats to adopt its twin budgets — one for the fiscal year that ends June 30 and the other for the two-year cycle that begins July 1 — while a majority of Republicans opposed them. But House Republicans took note that Norment also relied on Democrats to adopt legislation Saturday to contribute $154 million a year to repair the deteriorated Washington-area Metro system, which he supported with only six other Republican senators.

In a 60-day session that may be remembered more for what it failed to do, passage of the Metro funding package was among its biggest accomplishments, Northam said.

“An efficient and effective Metro system is very, very important to the economy of Virginia,” the governor said. “Virginia was the first state to bring that to the table.”

Maryland and Washington, D.C., must pledge to contribute their own shares before Virginia would contribute money in a compromise package approved Saturday by the House and Senate that would not raise taxes on lodging and deeds in Northern Virginia localities that are part of the Metro compact.

“This bill will set the bar,” said Del. Richard “Rip” Sullivan, D-Fairfax, a member of the conference committee that produced the compromise. “It will send a signal to Maryland and the District of Columbia that they will have to step up and do their part.”

Utility regulation

Northam also praised assembly leaders for adopting hotly debated legislation he’s already signed to overhaul regulation of Virginia’s two largest electric utilities. The legislation requires them to refund some of their excess earnings under a three-year rate freeze while allowing them to keep future overearnings by investing the money into technology to modernize the power grid, expand use of renewable resources and encourage energy efficiency.

Consumer advocates remain dismayed by the legislation, which restricts the authority of the SCC to set fair and reasonable electric rates for monopoly utilities, as required, with legislative guidance, by the Constitution of Virginia. The battle over the SCC judgeship played out in the shadow of the legislation, through which senior legislators made clear the assembly will direct commission policy over rates and investments for Dominion Energy Virginia and Appalachian Power Co.

The Senate appears poised to elect former Sen. John Watkins, R-Powhatan, to serve the remainder of Dimitri’s term, even though at 71, Watkins is two years from the state’s mandatory retirement age for judges. The House’s preference isn’t clear, although both bodies found three other candidates qualified for the job in addition to Watkins.

Other achievements Northam cited included legislation to raise the property threshold for felony larceny from $200 to $500 and reform regulations imposed by Virginia, both initiatives that the governor announced in deals with Cox, who became speaker in January after Republicans barely held on to a 51-49 majority after losing 15 seats in elections in November.

The political shift loomed large over an assembly session dominated by the budget debate over expanding Medicaid. House Republicans had thwarted McAuliffe four straight years under then-Speaker Bill Howell, R-Stafford, who ruled with a two-thirds majority that he made a firewall against expanding Medicaid under the Affordable Care Act.

The Senate, in contrast, has been controlled by a similarly narrow, 21-19 Republican majority that refused to budge on expansion in the budget, even though one of them, Sen. Emmett Hanger, R-Augusta, made clear to the end that he will support expanding health coverage if he gets the terms he wants.

Norment suggested, in his fiery denunciation of Cox on Friday and his apology on Saturday, that House Republicans have not figured out how to govern with such a narrow majority.

“I do think there’s a little bit of a conundrum going on in the House of Delegates as they are trying to culturally adjust to the shift in the margins that they have,” he said Saturday.

But Northam referred to “an awakening in the House of Delegates” and suggested that the Senate also might need to adjust its thinking with the approach of elections next year.

“The Senate, perhaps, needs to listen some more to their constituents,” he said.