Outgoing Republican Gov. Glenn Youngkin’s final budget proposal includes money for a second inland port, raises for teachers, an attempt to modernize the corporate tax code and an effort to make the standard tax deduction permanent.
Youngkin presented his final biennial budget proposal before the General Assembly’s joint money committees Wednesday morning — though he will have left office by the time the budget is reworked and passed by the Democratic-controlled General Assembly, and it will be up to the Democratic Gov.-elect Abigail Spanberger to review the spending bill and sign it.
He painted a rosy picture of the financial stability of the state, though Democratic lawmakers pushed back against that characterization, following federal budget and workforce cuts handed down in the first year of President Donald Trump’s second term in office.
“Despite predictions for financial calamity, fiponancial calamity that was predicted by many this year, and I have to say by many in this room, financial calamity has not happened,” Youngkin told the joint money committees. “Virginia again is running a significant surplus. We worked with the Trump administration to turn back on $2.3 billion of paused grants and, while yes, there have been federal workers who have lost their jobs, federal job losses have been far less than the catastrophic predictions.”
Democratic leader suggests Youngkin’s proposal could be ‘heavily’ rewritten
Youngkin urged incoming Spanberger and lawmakers to avoid raising taxes and to maintain many of his administration’s initiatives, along with his final proposal. He pushed the General Assembly not to rejoin the Regional Greenhouse Gas Initiative, from which he withdrew the state in 2023, and for Virginia to maintain the status of a so-called “right-to-work” state.
Spanberger attended Youngkin’s presentation but did not take questions from the press and did not directly address the proposal in a statement afterward.
“I look forward to working with the General Assembly to lower costs for Virginia families, invest in Virginia’s public schools, and protect access to critical healthcare services,” she said. “My team and I are already digging through the details of this proposal.”
Spanberger plans to unveil a key pillar of her administration’s economic policy on Thursday.
State Senate Majority Leader Scott Surovell, D-Fairfax County, said he expects “major surgery” to be done to the budget by lawmakers. He added that it isn’t uncommon for the outgoing governor’s budget to be “pretty heavily rewritten” by the legislature and the incoming governor.
He asserted that the General Assembly received billions in “expense surprises,” mainly from Medicaid funding losses and new K-12 education requirements and revenue cuts driven by the federal government.
“The governor’s out of touch with reality. We just got a report on the state of the commonwealth’s economy from ODU [Old Dominion University] two days ago which basically said economic growth is down, the port is getting creamed by tariffs, our workforce unemployment is rising, federal cuts are killing Northern Virginia, we have a general economic slowdown going on in this state,” Surovell said. “We’re going to have to find some money.”
What’s in Youngkin’s proposal?
The proposal would cost Virginia $72 billion in general fund monies and $211 billion in total resources, said Rob Damschen, spokesperson for the governor’s office.
Youngkin included about $35 million for a second inland port, which is slated to be built in Southwest Virginia. He included money for the Martinsville-based New College Institute for the first year of the biennium and a directive for the institution to continue to explore more economical ways to stay open — but no money for the college in the second year.
Also in the budget proposal is a phased-in approach to Youngkin’s effort to eliminate taxes on tips for service workers, along with an effort to eliminate taxes on overtime pay and taxes on car loan interest. The current governor’s proposal includes an effort to modernize the state’s corporate tax model.
Those measures, along with a requirement for the state to conform with major provisions in the federal so-called One Big Beautiful Bill and others, would cost the state roughly $730 million additionally per fiscal year, according to a senior administration official within the Youngkin administration. Those provisions in the federal act include implementing new work requirements for Medicaid recipients and limiting the total payments to health care providers.
The governor’s proposal also includes additional investments of $2.6 billion to cover the Medicaid forecast over the next three years and an additional $1 billion to provide educators and state employees with a 2% bonus in 2026, a 2% salary increase in 2027 and another 2% salary increase in 2028. It would fully fund the K-12 education benchmarking cost over the biennium. The proposal also includes hundreds of millions of dollars for pollution reduction efforts and for law enforcement and inmate medical care.
Not included in the governor’s proposal was money to maintain the current level of health insurance marketplace tax credits. On average, marketplace enrollees will pay about 114% more in monthly premiums in the new year, should Congress fail to vote to extend the credits by Dec. 31.
An effort to eliminate the car tax was also absent from the governor’s proposal.