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Virginia lawmakers pass bipartisan budget that leaves tax policy unchanged

by | May 14, 2024 | ALLFFP, Government, News

By Graham Moomaw, Charlie Paullin and Nathaniel Cline | Virginia Mercury

After months of partisan combat over different priorities, Virginia lawmakers approved a bipartisan budget deal Monday with no major tax changes, funding boosts for education and mental health and salary increases for teachers and state employees.

Both chambers of the General Assembly approved the new two-year budget plan by wide margins. In the House of Delegates, the vote was 94-6. The state Senate approved it 39-1.

“This has been a protracted process,” House of Delegates Appropriations Committee Chairman Luke Torian, D-Prince William, said on the House floor prior to the vote. “But working together with the Senate and the governor we have developed a product that all parties believe will meet the needs of the commonwealth.”

The handful of votes against the budget were cast by Republicans, but Gov. Glenn Youngkin officially signed the document Monday afternoon, resolving the budget standoff and officially ending the remote possibility of a state government shutdown on July 1.

“We in fact listened to one another,” Youngkin said. “And understood each other’s priorities and perspectives. And that came together in the budget that we are going to sign today.”

5 things to know about Virginia’s newly revealed budget deal

No tax increases, no tax cuts

The new budget agreement reflects the narrowly divided political dynamic in Richmond after Youngkin failed to win GOP majorities in last year’s legislative elections.

The legislation doesn’t include any of the tax cuts Youngkin called for in his original budget proposal last year. It also temporarily drops the idea of expanding the state’s sales tax to digital purchases like streaming services, downloads and software licenses, a tax expansion Democrats had included in their budget plan to help raise more money for public schools.

The end result is a budget with no tax cuts and no tax increases, but Democrats have signaled they plan to keep studying the digital sales tax proposal as part of a broader look at the state’s code ahead of the 2025 legislative session.

Democrats characterized the agreement as a win and emphasized that it reflected virtually all of the spending priorities they laid out during the regular session that ended in March.

“This is essentially the same budget that the governor called ‘backwards’ and now he will be signing it into law,” House Speaker Don Scott, D-Portsmouth, said in a statement. “We have historic funding for education, healthcare, coastal resiliency, and gun violence prevention. We are being consistent with our values and putting our money where our mouth is.”

Education funding

Due to the elimination of the digital sales tax, the state will lose $169 million in education direct aid spending. However, the budget includes more than $370 million for the At-Risk Add-On, which supports economically disadvantaged students, and a more than $70 million increase in support for English learner students.

The two-year budget includes state money to pay for 3% salary increases in both years for teachers and other school staffers as well as state employees.

The compromises on how public education will be funded in the new two-year spending plan “raise concerns about long-term fiscal stability of our state budget to fund critical K-12 priorities in the future,” the education advocacy group Fund Our Schools Coalition said in a statement after Monday’s special session wrapped.

The plan also has significant new spending to improve the state’s behavioral health system, adding more resources to help Virginians suffering from mental health crises.

RGGI reentry language nixed

In addition to backing off the digital sales tax proposal, the budget deal dropped a Democratic provision aiming to force the Youngkin administration to have Virginia rejoin the carbon market known as the Regional Greenhouse Gas Initiative.

Senate Finance and Appropriations Committee Chair Sen. Louise Lucas, D-Portsmouth, suggested those steps were necessary as part of the back-and-forth with a Republican governor.

“I know these actions are not popular … and many feel that we are essentially kicking the can down the road, but progress can take time and sometimes compromise,” Lucas said.

The market requires electricity producers to purchase allowances to emit carbon as a way to incentivize decreasing the release of planet-warming carbon dioxide into the atmosphere.The revenues are returned to the participating states, where in Virginia about $730 million had been directed toward flood resiliency and energy efficiency programs.

But Youngkin had called the monthly fee tacked onto customer’s monthly bills to recoup the allowance purchases — which amounted to about $2.39 in Dominion territory — a “hidden tax,” prompting him to withdraw Virginia from the market through an executive order and regulatory change, despite advocates saying a legislative change is needed. The matter is being challenged in Floyd County Circuit Court.

Del. Rip Sullivan, D-Fairfax, said in a floor speech that Youngkin insisted the RGGI language come out  “under threat of veto.”

“If RGGI is a tax then so are the additional fees Virginians will soon see on our electric bills,” Sullivan added, referencing legislation carried by Del. Israel O’Quinn, R-Washington, and Sen. Dave Marsden, D-Fairfax, that Youngkin signed, allowing utilities to recover early development costs for a small modular reactor. 

As for his insistence on removing the RGGI reentry language, Youngkin said in a press conference Monday afternoon, “We had a robust discussion around all aspects of the budget. … If we know that everyone is not happy then we probably landed in a good spot.”

Some environmental groups, except for the Chesapeake Bay Foundation and the Virginia Energy Efficiency Council, who support the RGGI funding coming into Virginia, released a statement earlier in the day that said removing the language was a “capitulation by the General Assembly.” The Bay Foundation and Environmental Defense Fund said in their own statements not including the RGGI language was a disappointment, but separate measures included in the newly approved budget — including funding for pollution reduction measures and a new Chief Resilience Officer — are to be lauded.

Veteran families’ tuition waiver changes

Even as legislators in both parties hailed the deal’s passage as an example of putting partisan differences aside, some lawmakers pointed to a new problem that arose during budget talks that happened largely in private and was apparently only spotted once the deal became public.

Several legislators in the House and Senate voiced concerns about a provision included in the budget they passed that will impact the Virginia Military Survivors and Dependents Education Program (VMSDEP), which provides college tuition waivers to the spouses or children of permanently disabled military veterans.

Language in the budget will now require family members of disabled veterans seeking to further their education at a college or university to first complete the Free Application for Federal Student Aid (FAFSA), a change from the previous standards that required applicants: be the spouse or child (age 16 to 29) of a living or deceased veteran of the United States Armed Forces, United States Armed Forces Reserves, or the Virginia National Guard Virginia residents; have a physical presence in Virginia; and attend a Virginia public college or university.

The program is administered through the Virginia Department of Veterans Services (VDVS) in collaboration with the State Council of Higher Education for Virginia (SCHEV).

Several senators said on the floor that the budget language adds an unnecessary roadblock for veterans’ families trying to obtain an education.

“This is an issue I’ve heard from numerous families who really feel blindsided by what has happened,” said Sen. Tara Durant, R-Fredericksburg. “We expect this type of legislation to go through the proper process, through committee, when those who are impacted by it can come before committee and speak on it. … Instead [we are] legislating this through the budget. Many of us today are surprised to see how this is going to impact those families.”

Sen. Bill DeSteph, R-Virginia Beach, characterized it as an unintentional error.

“There’s nobody here that wants to cause any harm to those who sacrificed their lives, and what we recognize as a benefit or helping hand for their children. … I know that in our hearts of hearts, we don’t want to cause any harm to this program. I’m asking for Gov. Youngkin to call [for] a study on” the program’s requirements, DeSteph said.

Sen. Jeremy McPike, D-Prince William, the patron of the 2019 legislation that expanded the program, agreed that its requirements needed further study and said his original intent was for the fund to provide veterans’ spouses and children “opportunities for undergraduate” education, not “medical school and other things” he said the program is currently being used to pay for.

Youngkin proposed an amendment that would have preserved military families’ access to the program without the new FAFSA requirement but lawmakers rejected that suggestion, and all of his amendments, when they reconvened in the April 17 veto session.

Partisan drama was kept to a minimum Monday, and General Assembly leaders appeared to be trying to complete the budget as quickly and efficiently as possible.

“I don’t want to keep y’all here any longer than I have to,” Scott quipped at one point while presiding over the House. “As much as I love you all.”

(This story originally appeared in the Virginia Mercury and is being republished under a Creative Commons License).

Mercury editor Samantha Willis contributed to this story.

Editor’s note: This story has been corrected to reflect that McPike’s legislation expanded the VMSDEP program, but did not create it.

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