Economic and Job Recovery?
Not the Special Session’s Focus
By Stephen D. Haner
With the Virginia General Assembly’s “Cops and COVID” special session moving into its third week, it seems likely to impede rather than assist the state’s economic recovery from the pandemic. It may also greatly expand COVID-19’s financial burdens in the years to come.
The highly publicized issues of unpaid rents and utility bills, threatening tens of thousands with choices between eviction, disconnection, or years of additional debt, are clearly related to un- and under-employment from the COVID-19 recession. But getting people back to work does not seem the top priority for legislators.
The original stated purposes for the session starting August 18 were to amend the state budget in response to the recession, and make other adjustments responding to the viral disease. Deadly confrontations between police and Black suspects in several American cities, and the violent response, added police and judicial reform issues to the agenda.
The 270 bills introduced by legislators (so far) reach far beyond those issues. Only one election-rules bill has passed both chambers so far, but 55 others have passed at least one chamber. This update focuses on some of those that will impact employers or taxpayers. There is mainly bad news on both fronts.
Both chambers are dominated by Democrats. So far, repeating the pattern from the regular session that ended in March, the Virginia Senate is refusing to adopt as “progressive” an agenda as the more numerous House. But it remains possible the General Assembly will:
- Create a state mandate for employer-paid sick leave, either through legislation or by inserting it into the budget bill. Legislating in the budget is getting to be routine, sadly.
- Extend protection and the payback period for those behind on their rents and utility bills, giving debtors from six to 24 month to pay. The 24-month period extends into 2023.
- Expand state authority to probe and punish alleged price gouging, not just at the point of sale but throughout the manufacturing and supply chain.
- Create a presumption that certain employees who get severe cases of COVID-19 were infected at work and deserve compensation, with the employer (public or private) footing the bill.
Something else that could impact any business or service operation dealing with the public:
- Emergency orders from the Governor, which may also be in force for months or years to come, may soon carry the risk of a $500 fine. Current law sets the minimum punishment as a class one misdemeanor, ridiculous for minor infractions and thus seldom imposed. Fines are easy and may prove commonplace, and produce revenue that governments need right now.
The worst news for the economic climate involves a failed idea. One of the key measures that all employers, including non-profits, sought from the special session was some protection against lawsuits over COVID if they are making good faith efforts to protect their employees, clients, and customers. Both House and Senate versions of that idea – which has passed in some form in many states – were withdrawn last week.
The House version of the bill had been amended into a form where the business community saw it as promoting litigation. Union efforts for similar changes led to the demise of the Senate bill. Only the nursing home industry still has active legislation creating some narrow immunity from lawsuit.
The many other states which have addressed this issue may see quicker and easier economic recoveries. Fear of lawsuits is playing a major role in many Virginia business operations remaining closed or limited.
One of the deepest and longest lasting financial impacts will come from the response, or lack of response, to the rent and utility debts. Both the state and the federal governments, with bipartisan support, have been quick to prohibit evictions or utility disconnections. But the answer to the inevitable question of who ultimately pays and when has been slow.
It is likely real estate evictions and foreclosures will be restricted into the spring of 2021, and legislation pending would prevent eviction at that point but instead require 12 or even 24-month repayment plans. Where the money will come from for those, how people will start paying even higher rents if the economy is still mired in recession in 2021, is never discussed.
On the utility side of things, prohibitions on disconnections and mandatory long-term payment plans are also proposed. But this past week reports surfaced that Governor Ralph Northam wanted to direct the State Corporation Commission to use any excess profits held by Dominion Energy Virginia to cover unpaid bills. Potentially more than $300 million, money that might otherwise be future refunds for all Dominion customers, could be diverted to cover the bills of those fallen behind.
It won’t be enough money, probably not enough even for Dominion’s late payers. Every utility – electricity, natural gas, water, and sewer – has seen its accounts receivable explode. Families which are able to get back on track will again be paying extra per month to cover their debts, leaving less for other needs or desires. The potential to further retard economic recovery is obvious.
Likewise, any decision to offer wage replacement, medical coverage, disability status or death benefits to COVID-19 sufferers means higher workers compensation insurance premiums for their employers.
The legislation pending is limited to health care workers, fire, police and other first responders, and school personnel. Many but not all of those will be government employees, putting the bill on taxpayers directly. If workers file a claim, their employer can seek to establish the disease was not contracted at work. Proving that may be impossible.
If approved, and it has broad and bipartisan support, do not expect coverage to remain limited to those few employment categories for long. A grocery store worker or Internet installer has just as strong a claim that the job put them at risk for this virus. Eventually this will cover everyone. As with the economic waves from the unpaid rents and utility bills, the costs will reach us all.
Stephen D. Haner is Senior Fellow for State and Local Tax Policy at the Thomas Jefferson Institute for Public Policy. He may be reached at [email protected].