General Assembly budget committees ditch Youngkin’s tax plan, increase spending for schools and mental health

The Democratic-led money committees in the General Assembly on Sunday denied Gov. Glenn Youngkin the $1 billion in additional tax relief and the proposed sales tax hike that he had asked for in his first two-year state budget. Instead, Democrats are pushing for more money to fund public education, pay increases for teachers and the expansion of mental health services.  

The House budget also seeks a total of $22.5 billion for transportation funding in Virginia, including $70 million in one-time general fund support to accelerate the Interstate 81 northbound lane widening project from mile marker 116 to 128 in the Salem district — a provision that is part of the budget that Youngkin sent to the legislature in December.

“This will provide funding to enable the widening of the southbound lanes to occur concurrently with the northbound lanes and therefore saves the commonwealth about $70 million over the life of the project,” Del. Paul Krizek, D-Fairfax County, the chairman of the House Appropriations Transportation and Public Safety Subcommittee, said during the presentation of the House of Delegates budget amendments in Richmond.

While nearly all transportation funds are distributed using funding formulas established by the Code of Virginia and then allocated to specific projects based on data-driven processes, there are “some projects that are so large and have such a significant impact on the commonwealth as a whole that direct budget action is warranted,” Krizek said. 

The subcommittee report also includes $20 million to the Cannabis Control Authority, “so they have the resources needed to ensure that adults have access to safe and legal products outside the influence of the black market,” Krizek said. Two rival measures seeking to create an adult-use marketplace in Virginia are currently moving through the legislature, although it remains doubtful that Youngkin would sign either proposal that reaches his desk.

Both money committees all but gutted Youngkin’s plan to overhaul Virginia’s tax base. The governor had called for a 12% reduction of the income tax and a sales tax hike from 4.3% to 5.2% to offset the estimated annual revenue loss of $2.3 billion. 

However, House Democrats retained a provision in Youngkin’s budget that would close the so-called tech tax loophole on digital goods that are currently classified as tax-exempt services — meaning Virginia would start taxing online music and film downloads from platforms such as Apple Music if the General Assembly approves the proposal. 

“It makes no sense to pay a sales tax when you buy a Blu-Ray disc, but you don’t pay a tax when you download the same movie from a digital retailer,” said Del. Luke Torian, D-Prince William County, the chairman of the House Appropriations Committee.

Democrats also agreed to Youngkin’s request to open up an additional 3,440 developmental disability waiver slots to address the priority one waitlist. The Medicaid waiver program helps cover the cost of certain services for those with developmental disabilities, and the expansion of the slots comes at a price tag of $300 million.

“Unfortunately, providing the slots does not guarantee services. This budget will retain these slots and also increase pay for personal care attendants to ensure that there’s not just an available slot, but services for those in need,” Torian said on Sunday. “The committee is also recommending more than $457 million for mental health and substance abuse services. This goes beyond the recommendation in the introduced budget.”

Instead of granting Youngkin his wish for another $1 billion in tax relief, House Democrats are proposing to invest $2.56 billion in early childhood and K-12 education, including $1.02 billion directed to local school divisions to fund salaries and Standards of Quality modifications.

Democrats want to direct $628.2 million to fund the implementation of a four-year plan to raise teacher salaries beyond the national average by providing two pay increases — 3% and 3.8%, at the start of each fiscal year. “We will stay on track to meet this milestone by 2028,” said Del. Sam Rasoul, D-Roanoke, the chair of the House Appropriations Elementary and Secondary Education Subcommittee. 

In her first budget presentation as the first Black chair of the Senate Finance and Appropriations Committee, Sen. Louise Lucas, D-Portsmouth, made clear that she wouldn’t lose track of her priorities and compromise her principles. 

“Because of my experiences, I hold the areas of education and public safety close to my heart,” Lucas said. “People of my generation, Black and white alike, were unable to attend school during Massive Resistance. And I want to make sure that no child is ever denied the ability to have a quality public education or to grow up in a safe and supportive community. These experiences have made me stronger and unafraid to stand up to anyone when I believe that what is being proposed is not in the best interest of the commonwealth.”

The Senate proposal seeks an increase of $1.6 billion over the biennium in general fund support for K-12 and restores Literary Fund amounts to support school construction. “Combined with the policy actions included in the introduced budget from all funds, this marks an increase of more than $2.6 billion,” said Sen. Mamie Locke, D-Hampton, the chair of the Senate Finance and Appropriations Subcommittee on Education. 

Both committees propose restoring the funding of the state-run New College Institute in Martinsville with a total of $6.2 million over the biennium. As part of his budget, Youngkin had requested that the institute present a business plan by October 2024. Without it, NCI would risk receiving about $4.5 million in proposed funding from the commonwealth for fiscal year 2025, but nothing in fiscal 2026.

The House budget also directs the state to study whether to convert the nonprofit Virginia Museum of Transportation into a state agency; a bill by Rasoul that would have had the state take over the museum was previously defeated, while one by Sen. Chris Head, R-Botetourt County, was delayed a year.

Both the House and Senate money committees hold public hearings and discussions that may result in amendments to the proposed budget. After review by each of these committees, the amended bill is brought to the floor of each house, where other amendments may be made before a vote, a step that is expected to happen later this week. 

Youngkin said in a statement Sunday that he will review the budget proposals from the House and Senate “through the lens that structural balance matters, that Virginians can’t afford another tax increase and, in fact, need additional tax relief, and that we need to build on the work we’ve done investing in education, law enforcement, economic and workforce development, and behavioral health in the commonwealth.”

Youngkin called his own budget proposal “a bold, necessary plan forward with the goal of ‘Unleashing Opportunity’” for all Virginians. “Today is just the start, and I am confident that working together with the General Assembly we can continue the progress we’ve made in our first two years and move the commonwealth forward together.” 

After reporting their respective amendments on Sunday, both chambers are set to vote on their budget bills on the floor sometime this week before the finalized versions cross over to the other body for review. As the next step, a Budget Conference Committee is appointed that typically is made up of six delegates and six senators. These conferees negotiate the final version of the budget and present it to the House and Senate, where it is voted on again before heading to the governor’s desk.