Today, Gov. Terry McAuliffe (D-Va.) unveiled an outline for his two-year $109 billion budget, the largest in state history and the first ever to exceed $100 billion. Despite threats to shut down the government in 2014 over his failed attempt to expand Medicaid in Virginia, McAuliffe has included the proposal in his 2016-2017 budget.

Here are the highlights:

  • Obamacare’s Medicaid Expansion
    • This is the third year in a row an expansion of Medicaid has been proposed by Virginia’s governor, with McAuliffe even threatening to shut the government down if it wasn’t included in 2014.
    • $3 billion of budget earmarked for Obamacare in Virginia
    • The Republican-run legislature is unlikely to entertain this motion.


  • Hospital Tax Increases
    • Hospitals will pay a new tax equal to three percent of their revenue as part of the budget.
    • The “bed tax” or “provider tax” authorizes collecting new revenue from hospitals in order to obtain a federal match of federal Medicaid funds, which are then usually paid back to the providers in the form of higher Medicaid reimbursement rates for new pools of Medicaid recipients.
    • This gaming of the federal Medicaid system is one of the downfalls of Obamacare and results in higher costs for taxpayers nationally.
    • Virginia added a Medicaid provider tax after 2009, and raised it in 2011.
    • The President and Congress have both taken steps to reduce Medicaid provider assessments.


House Speaker Bill Howell has said, of this proposal, “This makes no sense at all. As I see it, it’s just a shell game.”


According to the governor, “Actual non-withholding receipts exceeded the cap in fiscal year 2015, contributing to the $549.6 million dollar revenue surplus, the largest in the Commonwealth’s history.”  

Instead of gaming national taxpayers by relying on Obamcare expansion dollars to pay for tax cuts, the governor should demonstrate he’s serious about making Virginia more competitive with more aggressive tax reductions, paid for with surplus funds and with less spending increases. That would be a start.

Unfortunately, Gov. McAuliffe’s budget does nothing to rein in out of control spending in Virginia and only seeks to make it far worse. As North Carolina readies for another reduction in their corporate rate, down to 3 percent, the best McAuliffe has to offer is a quarter percent reduction promise contingent on an expansion of Obamacare in the state.

Hopefully Republicans view this for what it is, nothing more than a laundry list of overpriced wants, veiled in a pretend interest in minor tax reductions overall. If there’s any silver lining, it’s that McAuliffe recognizes that Virginia’s corporate rate of 6 percent makes the state regionally uncompetitive. 

Budget session begins January 13 in Richmond and will last 60 days.