House and Senate committees responsible for making changes to Virginia's state budget presented unusually similar visions for the commonwealth’s spending plan on Sunday.
The flagship proposal — in both chambers — is $1.1 billion in tax relief, mostly coming in the form of rebates: $200 for single filers and $400 for joint filers.
“This year, one of the issues that has weighed heavily on my mind is a struggle that working Virginians are feeling from inflation and from the general uncertainty that is currently part of our political environment,” said state Sen. Louise Lucas (D–Portsmouth), chair of the Senate Finance and Appropriations Committee.
“I said we had significant one-time money, and I promised we would provide relief in a fiscally responsible way. I have stayed true to my word,” she said in remarks as the Senate committee presented amendments to the current two-year budget.
That budget, which spans July 1, 2024–June 30, 2026, made record investments in education and health care, buoyed by revenues that the state did not expect to collect since Virginia governors have conservatively estimated growth for years.
“I think what you see is that we have took a global perspective throughout the budget to try to address the fundamental needs of all of Virginia citizens,” said Del. Luke Torian (D–Prince William) in response to a question about how close the proposals were. “We have conferred with the leadership of Senate Finance throughout the first several weeks of the session.”
In a statement, Republican Gov. Glenn Youngkin thanked Torian and Lucas.
“I look forward to finishing our review and while there are areas where we agree and others where we may disagree, we will go to work to deliver for Virginians, as we have done the past three years,” said Youngkin.
Unless the Legislature breaks from its recent track record, spending changes won’t be finalized for weeks after it concludes (at the end of February). Two years ago, elected officials and Youngkin agreed on amendments in September. Last year, they agreed on a full two-year budget in May. (Virginia’s fiscal year runs from July 1–June 30.)
That budget in 2024 came after months of deadlock, and used excess revenues to funnel more money into education while meeting Youngkin’s goals of no new taxes, no requirement to rejoin a regional carbon market and more funding for charter schools. Extra funding for Medicaid waivers and English language learners were also spending items that legislators and the governor pointed to.
This year, Democrats touted tax relief.
Taxes
With one notable exception, legislators mostly scrapped Youngkin’s tax proposals. Those included a proposal to end state taxes on tips and fund short-term elimination of the car tax for some low- and middle-income taxpayers.
As VPM News previously reported, the governor only planned funding of that rebate for three years, leaving it up to state legislators to find the money after 2027.
Instead, the General Assembly is proposing the one-time tax rebates at a cost of $978 million. Legislators are also increasing the earned income tax credit’s refundable portion by 5% — to 20% of the federal credit.
The budgets both modified Youngkin’s proposal to raise the standard deduction. Currently, the tax deduction is set at $8,500 for individuals and $17,000 for joint filers until Jan. 1, 2026, when it is scheduled to revert to $3,000 and $6,000, respectively. While Youngkin sought to permanently remove the expiration date, the Legislature raised it to: $8,750 for individuals, and $17,500 for joint filers until Jan. 1, 2027.
Gaming Commission
Both chambers also included funding for a new Gaming Commission to consolidate much of Virginia’s gambling regulation, which is currently handled by agencies varying from the Virginia Lottery to the Virginia Department of Agriculture and Consumer Services. But the Senate added language incorporating a bill from state Sen. Aaron Rouse (D-Virginia Beach) that would legalize so-called skill games.
“We put it in, because I genuinely believe that we need to do all we can to try to help small businesses,” said Lucas. “Question is: Where does it go after it gets to the governor's desk?”
Standing up a statewide gaming commission is a priority of Youngkin’s, though he signaled his resistance to skill games.
“I do not think we should take up one-off bills in gaming, particularly when those bills are being pushed by special interest groups… special interest groups that clearly don't respect the rule of law in Virginia,” Youngkin told reporters after his State of the Commonwealth address in January.
Skill games, which resemble video slot machines, were banned by the General Assembly in 2020, before a judge briefly blocked the law. In late 2023, the legislation banning them was upheld. But new machines that allegedly skirt regulations have since appeared, and their manufacturers have made large campaign donations to legislators.
Other key items
- Education: Both budget drafts remove a limit on how many support staff the state funds by contributing an additional $222.9 million to Direct Aid. They also provide a $1,000 bonus payment to teachers, although each proposal has a different timeline.
- Legislators declined to put $75 million toward Youngkin’s school choice initiatives — $50 million for a private education voucher program and $25 million in addition charter school funding.
- Capital city infrastructure: The House and Senate both maintained Youngkin’s proposal for an additional $50 million for Richmond to continue work on reducing Combined Sewer Overflows into the James River.
- The House also added $650,000 to mitigate the costs of addressing Richmond’s widespread water outage.
- Immigration enforcement: Some provisions in the budget can supersede state law, but only while the budget is in effect. While one of the governor’s proposed amendments would withhold funding from law enforcement that “prohibits or impedes communication or cooperation with U.S. Immigration and Customs Enforcement,” the House and Senate versions removed that provision.
Democrats have referred to uncertainty in federal spending as looming over Virginia’s budget. Federal grants and contracts make up nearly half of Virginia’s non-general fund revenue, the budget term for funds earmarked for specific purposes. In 2024 the state forecasted federal funds at $21.2 billion, and projected them to increase to $26.9 billion in 2025 and $27.5 billion in 2026.
Torian said lawmakers only took into account Virginia’s resources when forming the budget: “When we put the budget together, we really did not focus on what may be coming from DC.”
The House also did not address the possibility of Medicaid losing federal funding, but the Senate’s proposal includes a provision that the governor introduce a new budget bill if a certain threshold of funds are lost.
“It’s just making sure that everybody knows when there's changes early on, so that they can be addressed,” said Senate Minority Leader Ryan McDougle (R–Hanover). “If everybody is aware of them throughout the year, we can come up with strategies to deal with them.”
