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What’s at stake in Virginia’s state budget fight

Senators and House members chat
Shaban Athuman
VPM News
State Sen. Lamont Bagby looks on as Del. Luke Torian chats with state Sens. Bryce Reeves and Ryan McDougle, as well as Dels. Rip Sullivan Candi Mundon King during a recess on Friday, March 8, 2024 in Richmond.

Legislators resolved their differences, which still run contrary to the administration’s agenda.

State lawmakers are considering potentially doomed budget amendments that Senate and House negotiators unveiled Thursday, as Gov. Glenn Youngkin implied he would veto Democratic priorities in retaliation for a key senator scuttling an economic development project he backed.

Budget proposals from the State Senate and House of Delegates significantly differed on transportation funding, state employee compensation, environmental issues and taxes.

“They went extremely well,” said state Sen. Louise Lucas (D–Portsmouth), chair of the Senate Finance and Appropriations Committee, about the negotiations. “I think probably, in my opinion, better than they had been years past.”

Last year lawmakers, although different parties controlled the House and Senate, did not pass the budget until September. (Virginia’s fiscal year runs from July 1 through June 30 each year.)

One of the biggest ticket items in the compromise, called a conference report, makes up $1.2 billion in funding for K-12 education above what Youngkin had introduced. That represents a midpoint between the amounts each chamber had put forward. Much of that additional funding comes in the form of direct aid to school divisions — and funding to make up for a Virginia Department of Education error that led districts to believe they were receiving more state aid.

“The conference report does make really meaningful progress on helping students thrive,” said Ashley Kenneth, the CEO of the Commonwealth Institute for Fiscal Analysis, a progressive organization.

The House’s proposals for $150 million in funding for the Washington Metropolitan Area Transit Authority was in the conference report, along with a modified version of the Senate’s proposal for toll relief in Hampton Roads, and the Senate 3% raise for teachers and state employees.

The amendments also include a provision to rejoin the Regional Greenhouse Gas Initiative and utilize unobligated funds from it.

Legislators are expected to vote on the budget amendments Saturday and would then send the budget to Youngkin, who can veto items and request amendments. Legislators would consider those on April 17. (Updated March 10, 2024: The General Assembly voted to send its arena-less budget to Youngkin before adjourning on Saturday.)

Gov. Youngkin gives remarks
Shaban Athuman
VPM News
Gov. Glenn Youngkin reacts to news that the General Assembly removed an arena deal from the state budget proposal on Thursday, March 7, 2024 in front of the Virginia State Capitol.

Youngkin is expected to act on the budget in line with his amendments or vetoes of other bills the Democrat-controlled Legislature passed. Those bills include some with significant fiscal impact such as raising the minimum hourly wage, paid family and medical leave, and a regulated retail cannabis market.

Youngkin didn’t say whether he would take immediate action to keep an Alexandria arena project alive during a Thursday press conference. The project would have the commonwealth back a roughly $2 billion development by creating a bond-issuing authority. Youngkin has said it would create 30,000 jobs; the project is anchored around the promise of the Washington Wizards and Capitals professional sports teams leaving the District of Columbia for Northern Virginia.

“The next step is for the General Assembly, and particularly the Senate to embrace the opportunity. It's their move,” he said. This comes as Youngkin technically has the power to make amendments regarding the arena or event call a special session on it.

On Thursday a reporter asked the governor if the arena’s absence from the budget would impact his decision-making process when it came to vetoes.

Without going into specifics, Youngkin said that both bipartisan bills and those supported by Democrats were part of an “overall discussion.”

“So yes, the short answer is that there has been a lot of things that have been discussed, that had been part of an overall broad discussion with regards to not just the Monumental deal, but a lot of other things,” he said.

Alexandria arena deal set to backgrop Gov. Glenn Youngkin–General Assembly fight

Youngkin also alluded to Lucas being the “single roadblock” to the arena’s success.

Lucas watched Youngkin address reporters from the Capitol steps. When asked if Youngkin was picking a political fight with her, she said, “He can get one if he wants.”

The governor was already expected to veto a number of Democrat-backed bills before the arena project died in the General Assembly. Democrats passed bills expanding reproductive health access, tightened gun regulations and voting access and security.

Democrats have the slimmest majority possible in both chambers and cannot override a veto without Republican support. They can reject amendments by Youngkin, though. Language in the budget can blunt Youngkin’s veto power: For example, the budget includes language that would reroute funds left after a veto on the minimum wage to bonuses for state employees.

The budget amendments also include a sales tax on digital goods, which are currently exempt from Virginia’s Sales and Use Tax. Youngkin had included that in a larger tax plan that also cut income taxes. He implied after the State of the Commonwealth address in January that he wouldn’t accept an overall tax hike.

Legislators went even further than what Youngkin proposed, including business-to-business transactions, which the Senate had proposed. There is a limitation to software services representing a compromise with the House, which had exempted business-to-business transactions, like Youngkin.

We cannot go back on the tax relief that we have provided to so many Virginians.
— Gov. Glenn Youngkin

“At a time where $5 billion of tax relief over the last two years has been a meaningful catalyst to Virginia's success, we cannot go back on the tax relief that we have provided to so many Virginians,” Youngkin said Thursday, referring to tax rebates and other tax measures the General Assembly passed in last term’s divided Legislature.

The digital sales tax proposal brought over $1 billion in additional revenues, $505 million came from the business-to-business software tax, according to the Senate Finance and Appropriations Committee.

“Because they were rejected, the General Assembly had additional resources to invest in the building blocks of thriving communities like health care and education,” said Kenneth.

Another tax increase included a liquid nicotine tax that would bring in $24 million.

The compromise amendments saw a few notable boosts in funding for Richmond, including more money for Help Me Help You, a nonprofit facilitating people’s return from incarceration; the JXN Foundation, a historic preservation organization in Jackson Ward; Housing Opportunities Made Equal; and funding for a child care facility at Reynolds Community College.

It did not include additional money for Richmond’s Combined Sewer System beyond the $50 million Youngkin had originally requested.

Jahd Khalil covers Virginia state politics for VPM News.
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