Local budget season is over. Sort of.

Northern Virginia localities and school systems have mostly approved their fiscal year 2023 budgets, which will kick in this summer. But a state budget impasse in Richmond, where lawmakers are trying to reconcile a multi-billion dollar gap in proposals from the Democrat-controlled Senate and the Republican-controlled House of Delegates, makes the future of some local line items uncertain.

“I don’t know when we went from being a well-managed state to being one that can’t pass a budget,” says Jeff McKay, the chairman of the Fairfax County Board of Supervisors, and a Democrat. “It’s absurd. It’s an embarrassment for the Commonwealth of Virginia. And it does put a strain on counties, some more so than others.”

The state budget was supposed to be finalized by the end of the General Assembly’s regular legislative session in March. Localities typically set their budgets, in part based on the state’s decisions, by April or early May. With less than two months left before the new fiscal year begins in July, officials like McKay are frustrated with the delay.

The uncertainty especially affects school budgets, which include direct money from the state and federal governments as well as localities, many of which spend close to half of their general funds on school divisions.

In some counties, the state pays relatively little in school funding, the result of a funding formula that puts wealthier places on the hook for more education spending. In Prince William County, however, the state funds more than 40% of the education budget — making the school system particularly vulnerable to big changes from Richmond.

“If the state keeps to the budget or close to what Gov. Northam proposed, then we’ll be able to fund our budget,” says Babur Lateef, the chairman of the Prince William County School Board. “But there is a chance that we could lose $50 to $70 million of what we expect to come in, and that would be a significant hit.”

If that happens, Lateef says, the board will have to find areas of its budget to cut.

So, while budget negotiations continue in the General Assembly and with Gov. Glenn Youngkin, Northern Virginia localities are forging ahead with finalizing their budget plans — and thinking through how to edit them if they end up receiving less money from the state than they currently anticipate.

In general, the approved budgets don’t diverge too significantly from the original budget proposals submitted earlier this year by county and city budget staff.

Counties and cities are still recovering from — and responding to — the wide-ranging impacts of the pandemic. And in their budgets, they are attempting to ease some of the cost burden of a seemingly perfect storm of economic factors, including inflation and higher property assessments.

In Loudoun County, about $60 million in data center revenue was also expected to come in, but didn’t, which county staff attribute to a combination of factors, including pandemic effects like microchip shortages and possible shifts in the direction of the industry. That made this year’s budget even tighter.

“We actually asked the county administrator, even in the middle of the process, to go back and look at the numbers again, to kind of scrub the budget and make sure that we were only approving positions that kept county service levels at their current rate,” says Board of Supervisors chair Phyllis Randall.

That meant some painful decisions, Randall says. The county slowed its roll-out of body worn cameras for sheriff’s deputies, and it delayed the creation of Loudoun’s own long-wished for health department, separate from the Virginia Department of Health. The county received the green light for the department from the General Assembly this spring, but will not be able to move forward with putting it in place until the next fiscal year, according to Randall.

Acknowledging the increased cost of living and other financial impacts faced by residents, most officials have approved either a decrease in real estate tax rates, or have kept the rate the same from the previous year. Nearly all localities have also chosen to assess cars at a percentage of their actual cost — for instance, Fairfax will tax vehicles based on 85% of their value — in an attempt to counteract the effects of a volatile used car market on car owners. But even with those efforts, many residents will still see an increase on their tax bills.

Across the board, localities’ approved budgets focus on funding pay raises and bonuses for public employees, school staff, and first responders, who have led the regional pandemic response for two years, often without a salary increase.

“One of the ways I’ve phrased this is, ‘It’s time for us to put our money where our “thank you, essential workers” signs have been,’” says Arlington Board Chair Katie Cristol.

Cristol says finding ongoing sources of revenue to fund those raises was a challenge.

“We had a pretty significant amount of one time money, which is great for a ton of different priorities: housing and our Affordable Housing Trust Fund is a great example,” she says. “But it’s not really helpful for anything that we might want to add to the county on an ongoing basis, which is, you know, largely everything else,” including salary increases.

But figuring out how to fund raises for all localities was a top priority. Many local governments are experiencing severe vacancies, particularly among first responders and teachers — and, as McKay points out, they are in constant competition with each other and with the federal government for talent.

“Our counties and cities are in very close proximity to each other. So it’s not trivial. When one county increases pay, it really literally can affect the other one,” he says.

Employee compensation is one of the biggest-ticket items in any local budget in any year, not just this year. Beyond that, this year’s budgets have some added modest investments in priorities like incentivizing affordable housing, advancing mental health crisis care, chipping away at student learning gaps, and mitigating climate change, among other things.

Affordable Housing

Preserving older, more affordable housing and incentivizing construction of new housing are crucial if Northern Virginia wants to prevent displacement and support its diverse communities, says Michelle Krocker, of the Northern Virginia Affordable Housing Alliance.

“In Northern Virginia, we have several separate jurisdictions who look at this issue in different ways,” she says. “And I can say, though, that there has been a significant commitment to housing, both through budgets and through land use and zoning policies.”

All major jurisdictions in Northern Virginia, Krocker says, increased their contributions to housing in their budgets for fiscal year 2023. Much of that investment went into affordable housing funds, which counties and cities can use to help finance proposed projects from developers. (There are multiple other funding streams that usually feed into a single project.) In some cases, elected officials added money to their affordable housing funds, beyond what was in the initial budget proposals local government staff presented earlier in the year.

The Fairfax County Board of Supervisors, for instance, added $10 million more to its contribution this year, according to McKay, making the county’s total contribution close to $30 million. The Arlington Board also increased its contribution to the county’s Affordable Housing Investment Fund, from a proposed $16.9 million to $18.7 million.

All that money is just one source of funding for the developers who build affordable housing projects, Krocker explains. “It is not unusual for these projects to have five, six, seven sources of debt and equity, because that’s what it takes to build quality affordable housing for people with restricted incomes in a high-cost area like Northern Virginia,” she says.

While this year’s housing fund investments represent progress, there’s always plenty more to be done, Krocker says. She and other advocates are particularly concerned about just how affordable the housing being built actually is.

“We are really, as advocates, focusing on making sure that we create housing for essential workers who are only making $25,000-$35,000 dollars a year,” she says. “We have fallen down in that area, not only in Northern Virginia, but I think regionally across the DMV.”

Schools

Like broader county budgets, school officials say their main goal in this budget cycle is to fund pay raises for teachers and support staff.

In Prince William County, Board Chair Babur Lateef says another central priority was adding teaching assistants, particularly for classes of younger children. The school division plans to fund 100 special education assistants and 88 kindergarten teaching assistants — a decision Lateef says the board saw as an efficient use of limited funding.

“There’s a number of studies that show investing in pre-K through third grade has a greater payoff in return on investment – for graduation success, student success, test scores – than other types of investments,” he says.

But all that may be in jeopardy, depending on where the state budget lands. The top priority, Lateef says, is maintaining the raises for current staff in the budget. New hires and even some capital improvement projects might need to be delayed if state support is less than expected.

Lateef called contemplating those cuts “extraordinarily challenging,” given the scope of pandemic-driven learning loss the schools are trying to make up.

“Right now, the needs are so great,” he says.

Climate Change

After this budget cycle, Arlington will have a new Office of Climate Coordination and Policy. It will start as two positions responsible for working across departments to amplify and advance the county’s response to climate change, including its community energy plan, climate resilience projects, and stormwater management work — “all together really kind of embodying what was described as a ‘whole of government approach’ to climate,” says Cristol, the Board chair.

The county invested a total of $4.65 million into climate-oriented work, including $1 million for its Community Energy Plan fund, a pool of money for what Cristol calls “smaller but impactful opportunities” to help the county meet its energy plan targets.

“So that might be things like studies, it might be things like piloting electrification at one of our facilities, other investments and small capital retrofits and otherwise advancing those community energy goals,” she says.

Arlington also funded energy efficiency projects, a Zero Waste plan, installation of solar panels on county buildings, and new county electric vehicles. In neighboring Alexandria, the fiscal year 2023 budget includes funding to start projects that will help with long-term sustainability goals, like electrifying the city’s DASH bus fleet and adding electric car charging stations around the city.

Mental Health 

While Loudoun County’s budget was one of the hardest in recent memory, according to county Board of Supervisors chair Phyllis Randall, there was one priority she did not want to stint on: adding staff to the county’s mental and behavioral health departments.

“What we know is, post-COVID, we’re going to see and we were already seeing what I’ve deemed the ‘second pandemic,’ which is a lot of behavioral health, mental health issues, depression and anxiety, suicideology,” says Randall, a trained mental health therapist.

The county made investments in more than 10 mental health case management and administrative positions.

Loudoun was not alone in focusing on mental health. Both Alexandria and Fairfax expanded funding for the mental health co-responder programs — which pair a mental health clinician with a police officer to respond to behavioral health emergencies — they piloted in the last year.

“Now in this budget, we’ve begun to fund it permanently,” McKay says. “That’s one I think that everyone should be focused on, especially as we respond from COVID, and we know that there’s mounting mental health issues.”

In Fairfax, the county will dedicate an additional $1.2 million — for a total of more than $2.1 million — for the co-responder program that pairs mental health clinicians with police officers when responding to behavioral health emergencies. In Alexandria, which is seeing good results from its initial pilot with one co-responder pair, the staff for the program will triple under the fiscal year 2023 budget.

Deliberations over the state budget between Republicans and Democrats in Richmond are ongoing. The state budget must be approved by June 30 to avoid a potential government shutdown, which would be unprecedented. In the meantime, local governments will watch and wait — and hope that their own budget work will remain unchanged.

“County budgets have to get passed,” says Randall, of the Loudoun Board of Supervisors. “They just do. We don’t get to wait and go back two and three times.”