Two top Virginia lawmakers charged with negotiating an updated state budget said Thursday they’ll hold off hammering out a spending plan until they get a better sense of whether a U.S. recession is on the horizon.
Secretary of Finance Steve Cummings told budget negotiators Tuesday that while the state’s revenues remained solid, he anticipated a stronger possibility of a recession in the next few months, according to state Sen. George Barker (D-Fairfax), one of two top Democratic budget negotiators in the Senate.
Barker said Senate Democrats agreed with House Republicans, led in negotiations by Del. Barry Knight (R-Virginia Beach), on getting a better sense of how economic uncertainty might affect the state’s bottom line before deciding how much money to spend in the next fiscal year.
“We certainly are going to get a lot more information over the next several weeks and try to put something together that makes sense,” Barker said.
Knight confirmed in an email that they’d agreed to wait before getting into the nitty-gritty of budget numbers.
Lawmakers did not specify when budget negotiations would resume.
The state’s revenues have so far surpassed expectations this fiscal year by about 1%, according to the latest February revenue report. But stubbornly high inflation and interest rates, a political fight over the federal debt ceiling and turmoil among some banks have led some observers to warn of an imminent recession.
Lawmakers passed a two-year budget during a special legislative session last year. They update that plan in odd-numbered years based on how much money the state takes in compared to estimates baked into the budget. Higher-than-expected revenues have left lawmakers with an additional $3.6 billion to spend — if the divided legislature can agree on a spending plan. If they can’t, the current budget will remain in place without any changes.
Gov. Glenn Youngkin and the GOP-controlled House are pushing for an additional $1 billion in tax cuts for individuals and corporations, as well as investments in areas like mental health services. Senate Democrats argue the funding should go entirely toward public services, with much larger investments in education, health care and teacher pay, according to an analysis from progressive policy research organization The Commonwealth Institute.
The recession fears haven’t caused Youngkin to rethink his proposal, according to a statement provided by his spokesperson, Macaulay Porter. Youngkin noted his plan calls for pausing certain tax cuts and spending if revenues dip below specified levels.
“When it comes to working your way through a recession, providing tax relief to Virginians will be incredibly important, and investing through the recession so that we can come out stronger on the other side,” Youngkin said in the statement. “This is a real opportunity for us to use our current financial strength in order to serve Virginians, both in a recession and to come out even stronger.”
Knight did not respond to a question about whether potential revenue declines would imperil Youngkin’s tax plans. And Barker said it was too soon to say what might have to change in the Senate’s budget.
“Nothing's off the table at this point,” he said.
