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Divided priorities, economic unknowns loom over new state budget

A group of people sit in a discussion
Shaban Athuman
VPM News
Gov. Glenn Youngkin leads the Governor's Advisory Council on Revenue Estimates meeting on Monday, November 20, 2023 at the Patrick Henry Building in Richmond, Virginia.

Gov. Glenn Youngkin’s conservative fiscal estimate is not new.

Gov. Glenn Youngkin indicated that the budget he will introduce next month will be planned around the possibility of a mild recession, after meeting with the Governor's Advisory Council on Revenue Estimates, or GACRE.

“I believe that we really did settle on an expectation that planning for a mild recession next year, that could have a little bit of downside to it, is OK,” he told reporters after the GACRE meeting.

The expectation is not new. Youngkin told the group of top legislators and Virginia business executives that policymakers have continued to plan around a mild recession coming in the coming year, although one has yet to arrive.

Budgeting around the expectation of less revenue means fewer dollars for competing priorities between the governor and the incoming Democrat-controlled General Assembly. It also comes as federal pandemic aid becomes less available and a July report from the assembly’s research arm said Virginia’s schools were underfunded by about 14%, or about $1,900 per student.

“It is certainly a more normal budget cycle than we've seen in the last three years, as COVID itself has retreated from driving so much of what happens with the budget,” said Andrew Pennock, a public policy processor at the University of Virginia.

Pennock also said there’s wisdom in being risk-averse and making conservative estimates about the economy.

“On the other hand, there are real needs in the commonwealth that are not being met because of the conservative budgeting policy… those are trade-offs,” he said in a Tuesday interview.

Democrats like Del. Luke Torian of Prince William, the incoming chair of the House Appropriations Committee, are eyeing increases to education and health spending, he told VPM News on Tuesday.

Torian said there was “plenty of runway” for compromise with Youngkin on budget priorities.

“There very well may be some differences, we'll find out Dec. 20 when the governor presents his budget to the money committees,” he said.

Pennock said regional, urban-rural divides and changing populations will be major influences on the budget, combined with a General Assembly elected after redistricting.

But he expected the political landscape to be the main factor shaping the budget.

“I think the big question is: Will the governor have any shot at putting the temporary tax cuts either back in as temporary or making them permanent?” he said.

An impasse over how to distribute billions in unexpected revenue between tax cuts and funding increases lasted six months after the end of the legislative session in February. In the interim, legislators funded some programs as required by law and provided some additional money for education.

The late fiscal 2024 budget Youngkin signed in September included temporary increases in the standard tax deduction as well as one-time tax rebates.

Youngkin didn’t say anything about plans for new tax cuts or tax relief Monday.

“I continue to be concerned about the cost of living in Virginia. And we're continuing to evaluate how best to address that,” he said. “We gotta get revenue sorted and then we'll worry about how best to address it.”

Youngkin presents his budget Dec. 20, after which both houses in the General Assembly will make their amendments. The “money” committees will complete their actions on budget bills on Feb. 18. The current budget runs until June 30, 2024. 

Jahd Khalil covers local government, the economy and labor issues for VPM News. Previously, he covered state government for RadioIQ and was a freelance journalist based in Egypt.