Gov. Abigail Spanberger urged “prudent budgeting” and “thoughtful long-term planning” in her first address to the General Assembly joint money committees on Wednesday, despite Virginia’s relative fiscal strength.
The mid-August address to the joint money committee is an outline of the commonwealth’s financial status and seen as a precursor to the governor’s budget proposal, which is typically presented at the end of the year.
Virginia’s general fund revenues grew $2.1 billion, or 6.7%, over the prior year, Spanberger told the committee Wednesday morning. That amount exceeded the official forecast by $938.8 million, or nearly 3%.
“Make no mistake about it: those numbers are good for Virginia — and they come down to a few things that we all need to consider,” she said.
“First, prudent budgeting. The commonwealth deliberately assumes our most volatile revenue — non-withholding, the taxes paid outside a paycheck — won’t grow much. And that conservatism leaves real upside in most forecasts. Second, strong markets. Despite the very real challenges families are facing, the S&P 500 ended the year up 21%, driving non-withholding growth of nearly $510 million — 6.8%, and $347 million above forecast. And third, our labor market. In the wake of DOGE’s slashing of our federal workforce, Virginia continued to lose jobs in FY26.”
The commonwealth lost roughly 43,600 jobs, or about 1%, last fiscal year. Half of those jobs were in the professional and business services sector and the other half were in the federal government. Employment in Virginia is expected to stay flat over the next two years. And some of the commonwealth’s sales-tax strength was the result of inflation and higher prices, she said.
Sectary of Finance Mark Sickles said that many job losses may be due to retirement, however, and retirees continue to pay income tax.
Looking forward, Sickles said, state revenues must grow by 4.1% to meet the forecast this fiscal year.
Del. Terry Austin, R-Botetourt County, said that the growth in state revenue as outlined by Spanberger and Sickles indicates that Virginia is in a strong position.
“I think we’ve got a lot of things ahead of us,” he added, referring to federal changes to programs like Medicaid and the Supplemental Nutrition Assistance Program that have increased the commonwealth’s cost share. Efforts to cover some of those changes were included in the biennial budget.
“We certainly can’t bankroll everything forever, it’s going to be a problem,” Austin said. “It could be devastating to our finances long-term.”
Next steps in the state budget process are in October when the Joint Advisory Board of Economists is slated to meet, followed by the Governor’s Advisory Council on Revenue Estimates in November. Spanberger is expected to present her budget priorities in December before the General Assembly convenes for its 2027 session in January.
