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Legislators, governor break budget deadlock, extend negotiations

Youngkin gives remarks
Shaban Athuman
VPM News
Gov. Glenn Youngkin gives remarks flanked by House and Senate Leaders during a reconvene session on Wednesday, April 17, 2024 at the Virginia State Capitol in Richmond, Virginia. Youngkin and Democratic leaders announced they had reached an agreement to extend the timeline for budget talks into a May special session.

The House exercised an arcane constitutional maneuver to prevent a full budget veto.

The Virginia General Assembly aims to finish and pass a budget by mid-May, after Democratic leadership agreed with Republican Gov. Glenn Youngkin to extend and restart the negotiating process.

The extension of budget negotiations avoids the prospect of a gubernatorial veto — at least for the moment, amid an increasingly tense political atmosphere — that could put a dent in Virginia’s financial reputation. It also provides time for policymakers to gain a clearer picture of a predicted revenue surplus.

The Virginia House of Delegates took a pair of votes Wednesday that put the Legislature on a path to restart the budget process.

House Speaker Don Scott told VPM News the motion looks “drastic,” but reflected an agreement on how to move forward.

Delegates approved a motion that deemed Youngkin’s 242 budget amendments “not specific and severable.” The vote was 100–0. They also voted to pass by the spending legislation for the day, essentially killing the bills.

“I'm not sure if we'll have ‘kumbaya’ on the final budget, but we have ‘kumbaya’ today on how we get on a path to a budget, and I think we'll be able to do that,” he said Wednesday.

The budget debate is likely to remain the same: the future of tax policy and its effects on how certain priorities are funded.

Youngkin told reporters the extension of budget discussions was a collective decision and the specifics had not been settled.

“That's what the work to do over the course of the next 30 days will be really targeted towards,” he said. “We've committed to start working, and I think that’s really important.”

Tensions over the competing budget visions had been simmering for weeks, as the General Assembly entered the reconvene session on Wednesday to consider the governor’s legislative actions.

In early March, the Legislature approved a budget that gutted Youngkin’s proposed plan to cut taxes. The governor then went on a campaign-style tour labeling that budget “backward,” while Democratic leadership went on its own tour to promote their plan.

Speaker Scott listens
Shaban Athuman
VPM News
Speaker of the House Don Scott Jr., D-Portsmouth, listens during a Reconvene Session on Wednesday, April 17, 2024 at the Virginia State Capitol in Richmond, Virginia.

After receiving that budget proposal from lawmakers, Youngkin introduced 200-plus amendments in April — eliminating tax increases and funding Democrats’ priorities at a lower level.

Del. Luke Torian (D–Prince William), chairperson of the House Appropriations Committee, said the same issues would be up for negotiation when the budget process restarts.

“No decisions have been made at this point. Everything that we had in our budget that we sent to the governor, all of it is still on the table for discussion and deliberation,” said Torian.

Youngkin’s budget amendments eliminated a sales tax on consumers’ digital goods that he had originally introduced alongside a sales tax reduction, but Democrats broadened it to include business-to-business transactions.

After eliminating that tax proposal, and introducing a few of his own priorities, Youngkin’s amendments accounted for fewer resources by restructuring some of the state’s financing and by reducing funding for certain programs. Higher education and transportation saw notable cuts. But the largest difference, outside of administrative restructuring, was cutting direct aid for K-12 public education by $485 million.

Youngkin said that a “common ground” compromise position was possible: keeping the status quo on taxation and funding most of the GA’s priorities — save for those the governor vetoed — albeit at a lower level.

But going into Wednesday, it appeared the Legislature would send the governor a proposal including tax hikes, which Youngkin had for months signaled would be vetoed.

Scott said he thinks the proposal passed by the Legislature would serve as a starting point for future negotiations.

“We already know, based on some of his amendments, what we need to do,” he said.

May special session

Both chambers of the General Assembly voted Wednesday to direct Youngkin to call a special session on May 13, which he did hours later.

Virginia’s fiscal year runs from July 1–June 30, and the budget up for debate runs for two years through June 30, 2026. State funding from the previous biennium expires this year on June 30.

In the interim, Virginia’s fiscal standing could influence how negotiations move forward — and the timing coincides with planners’ understanding of state tax return revenues.

“As the majority of Virginians complete their state tax filings by May 1, we’ll have stronger confidence in the fourth quarter outlook by May 15,” said Youngkin in an emailed statement Tuesday.

The release also said that “core-revenue sources” were ahead of forecast by $400 million. On Wednesday, Youngkin said the surplus could be as high as $1.1 billion, although $700 million of that is expected to be collected between April and June and is from sources that are difficult to predict.

“There's still risk there, we recognize that. And so, we're not going to do anything that is viewed as aggressive,” Youngkin said. “We're going to be prudent, just like we have been all along.”

If resources continue to run ahead of forecast, Youngkin and the Legislature would have more space to negotiate. The tax hike Youngkin seeks to eliminate is roughly the same size as the high end of budget surplus estimates.

Scott downplayed the revenue reports’ effect on the agreement reached Wednesday morning.

“I'm not sure if that played a role in people getting in a better place,” Scott said.

He said the status of Virginia’s credit rating was something that everyone wanted to preserve, and that governance is a large part of the consideration.

The state currently has the highest possible credit rating — AAA — which allows it to borrow at a lower rate.

Youngkin said the budget extension puts Virginia on a path that would “not put us in jeopardy between here and there.”

The General Assembly measure used Wednesday — which determined all of the governor’s amendments were not “specific and severable” — provided a flexible legislative vehicle to extend the budget negotiations without a special session, which would have resulted if the entire budget was vetoed.

“The good news is that these types of actions don't set the same type of precedent on future sessions that many other ones and decisions from the body [would],” said Del. Bobby Orrock (R–Caroline).

Orrock, the most senior member of the House, was a delegate when the power was introduced after a 1994 amendment to the Virginia Constitution. He said it was essentially a “mulligan” — or do-over clause.

Republicans actually produced a copy of the Virginia Constitution to double-check the provision, since it's rarely employed, a House GOP spokesperson said.

Updated: April 17, 2024 at 9:13 PM EDT
Adds context for negotiations and House vote.
Updated: April 17, 2024 at 3:10 PM EDT
Adds comment from Minority Leader Del. Todd Gilbert.
Jahd Khalil covers Virginia state politics for VPM News.
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