Virginia’s state budget negotiators are proposing to give state employees a bonus, keep skill games illegal, and use an optional local tax to fund school construction, alongside the tax rebates both chambers had previously proposed.
“We sought to address the needs of folks in the commonwealth, whether it be education, whether it be health care, preparing for job creation,” Del. Luke Torian (D–Prince William), chair of the House Appropriations Committee, said Thursday. “[We’re] making sure that we're continuing to move the Virginia economy along and take care of the folks that matter most.”
After Gov. Glenn Youngkin proposed a rebate to offset Virginia’s car tax and eliminating taxes on tips in December, both the House of Delegates and state Senate opted to reject that and propose a broader tax rebate instead. But they differed on approaches to gambling legalization, school construction and education, and funding for Richmond’s 150-year-old stormwater system.
The proposal, on which legislators can vote Saturday, contrasts with what Youngkin put forward on taxes, immigration policy, and education. It also comes as uncertainty around federal funding, jobs, contracts and grants could pose serious budget challenges.
“I think this is just the beginning. I don't think people have begun to feel the effects of what this administration is going to do,” said Sen. L. Louise Lucas (D–Portsmouth), chair of the Senate finance committee. “And because I believe government has a role in trying to make life easier for the people that we represent, I just see a lot of work to be done.”
House Minority Leader Todd Gilbert (R–Shenandoah) said Thursday that he hasn’t been able to give the document a close read. (Legislative rules require that members have 48 hours to read the budget before voting on it.)
“I doubt it's changed dramatically. But there's a little bit of tax relief in there. Not the kind we had intended or the sustained kind that we had intended,” he said. “There were a lot of things embedded in the budget are funding for things that just aren't everybody's chief priorities.”
The budget amendments would add or remove funding from the two-year budget passed last year, which lasts through June 30, 2026. That budget gave state employees a raise, put money behind child care in light of expiring federal support, and supported money behind Youngkin’s behavioral health policy priorities.
That budget also came about after a long stalemate in negotiations where the chance of a statewide government shutdown was raised. Crisis was averted after legislators used unexpected revenues — tax collections as the result of a better economy than budget officials planned for.
What didn’t need to change
Since the House and Senate already agreed on measures opposing the governor’s, the Joint Committee Conference Report — the official name of the compromise bill — includes a rebate of $200 per filer ($400 for joint filers). It also extends the period in which 20% of the earned income tax credit for low-income filers is fully refundable.
When providing tax relief, Democrats in recent years have opted on the side of tax relief with an expiration date or one-time rebates. Lucas has often said she has a long view on finances, including in an interview Tuesday.
“We know we had some one time spending, and we did that, as I will say, as conservatively as we can with the understanding that we don't know what else is coming,” she said. “I think that members on both sides of the aisle have been mindful of the fact that we're going to need to do something to help people who are going to be losing their jobs, possibly losing their homes, and there's going to be a need to have some kind of a safety net.”
The bill doesn’t include any changes to earned sentence credits or a Youngkin-backed requirement to withhold funding from local corrections facilities for not cooperating with federal immigration enforcement.
It also removes a limit on how many of a local school division’s support staff are funded by the state, and raises per pupil spending to $8,662 in FY25 and $8,983 in FY26, according to The Commonwealth Institute for Fiscal Analysis.
Lifting the “support cap" with $223 million will allow some localities to fill support positions they couldn’t afford, while giving others the ability to spend their local dollars elsewhere.
The conference report maintained an additional $25 million for a child care pilot program and a $1,000 bonus for teachers and other instructional positions.
It also removed an amendment that Gov. Glenn Youngkin had proposed that would have disallowed state money to pay for Medicaid-covered abortion services.
What did change
Despite putting forward a more unified budget than usual, the House and Senate proposals still differed.
“It took a whole lot of back and forth to get to where we are now, but at the end of the day, I think everybody realized that we had to have some compromises,” Lucas told VPM News on Tuesday.
One of the most notable policy differences came on on gaming policy.
The Senate proposed legalizing “skill games,” gaming devices that resemble video slots. That did not survive — but what did was a House proposal to keep a larger portion of tax revenue from historical horse racing venues with a venue’s localities.
The company that operates the racetrack at New Kent, currently Churchill Downs, will also have to pay $110,000 on race days. That offsets New Kent’s costs for hosting races.
“It's kind of hard when you got a long list of things that are priorities to everybody and everything is obviously not going to make the top 10 list,” said Lucas of the gaming policy negotiations.
Torian said skill games would be revisited in 2026.
The combined budget would give a one-time 1.5% bonus for state and state-supported local employees, matching the Senate’s proposal. The House had funded a 1% bonus in its budget.
It also includes $50 million for the Richmond Combined Sewer Overflow system, which Youngkin and the House had previously proposed, although there is an adjustment in its funding source and the timeline of funding.
The conference report has an additional $20 million for the Virginia Business Ready Sites Program proposed by the governor, as well as $1.5 million for marketing Virginia to outside companies.
“Economic growth is extremely important, and if we can prepare these sites, it helps our potential of recruiting other companies to come to the commonwealth,” said Torian.
“We did a full $8.7 million to beef up CSBs to help meet the disability waiver quota that the governor has,” said Del. Mark Sickles (D–Alexandria) of Community Services Boards, which provide services for developmental and behavioral health. “We're trying to help him keep his promise.” (The House proposed over $16 million in additional funding for CSBs; the Senate did not propose any extra money.)
The Senate had included a provision that would create an oversight review group in case the federal government withdraws funding for Medicaid expansion. The conference report doesn’t have similar language, although it does include reporting requirements from the executive branch if the federal government does reduce federal grants.
What's next?
After the conference report passes the entire General Assembly — presumably on Saturday — Youngkin will have the opportunity to sign the report as is, propose budget amendments or veto.
Legislators are scheduled to reconvene on April 2 to consider changes to the spending bill and other pieces of legislation.
It's reasonable to assume that Youngkin will veto much of the legislation the General Assembly passed under the Democrat majorities in both the House and Senate. Those will affect the final outcome of the budget as spending and revenue from each bill changes how state dollars flow.
This also might not be the first go around for budget amendments. Legislators have said they are prepared to come back to adjust the budget and spending in the case of federal funding dropping off or widespread layoff of the tens of thousands of government employees across the state, who are typically highly compensated.
“We can always come back to deal with issues that may have left some people behind. I don't want to leave anybody behind,” said Lucas. “Things are going to get a whole lot tougher before they get better, and we need to be prepared to take care of everybody.”
