Virginia, We Have a Budget!

This past session was a little bit like the epic Ratt song “Round and Round” – for those of us who grew up in/survived the 1980s. Every time I sat down to write an update on Virginia’s biennial budget process, it seemed things were about to go through another round of amendments, vetoes, and negotiations.

That changed this past Monday. Within the span of about five hours we opened special session, voted for the budget in committee and on the full House Floor, and held a bill signing ceremony with the Governor. Of course, this was the culmination of weeks of work as the framework of a compromise deal was hammered out. In the end, this is a budget I believe Virginians can be proud of. The outcome suggests the effort was worth it – with the budget passing by an overwhelming bipartisan vote of 94Y-6N in the House and 39Y-1N in the Senate.

BUDGET CONTEXT

Normally, the budget would be adopted by the General Assembly, amended during the reconvened session in mid-April, and signed into law by the Governor soon thereafter. Several factors, however, contributed to this year’s extra inning.

• Over the last two years, the General Assembly has enacted more than $5 billion in tax cuts and rebates – mostly because revenue increased faster than expected. 
• In July, Virginia’s Joint Legislative Audit and Review Commission (JLARC) released a long-awaited study confirming what most of us have known for a long time – Virginia significantly underfunds the state’s share of K-12 education. This translates into higher local real property taxes as localities struggle to make up the difference, especially in places like Fairfax County and the City of Fairfax. 
• The Governor introduced a budget in December that didn’t do much to address K-12 education per the JLARC report but did propose a series of changes in the tax structure. This included reducing the income tax as well as modernizing the sales tax.
• While the income tax reduction was rejected, the General Assembly saw merit to the Governor’s proposal to modernize the sales tax and using the revenue to pay for much needed investments in K-12 education. 

Virginia has long struggled with modernizing its tax structure. In this case, the issue is that many of the goods that were once sold over a counter are now delivered digitally. So, when I went to buy an album or cassette tape at Sam Goody's back in the day, that was taxed. Today, that same music is digitally downloaded or streamed, which is not taxed. The same holds true for streaming video, cloud storage, software packages, and other electronic media. The sales tax is not the only thing that needs to be modernized. The transition from gas-powered to electric vehicles means we need to right-size how we pay for transportation infrastructure. Virginia’s tax brackets, last updated in the 1980s, are laughable. The highest bracket is $17K, meaning millionaires are in the same bracket as the vast majority of low-income households.

The Governor objected to the budget package and sent down 242 proposed amendments. Instead of rejecting the amendments and risking a veto of the entire budget, the General Assembly chose to re-start the process. Ultimately, conservative forecasting and a continued strong economy came to the rescue. In exchange for backing off sales tax reform, the Governor agreed to most of the General Assembly’s spending priorities. The budget is structurally balanced. That said, our six-year forecast shows the importance of addressing weaknesses in our tax structure now – rather than continuing to kick the can down the road. To that end, the Virginia Joint Subcommittee on Tax Policy has been tasked with meeting in the interim and making comprehensive recommendations for the next General Assembly session.

BUDGET HIGHLIGHTS

As a budget conferee, I was pleased to be part of the negotiating team that resulted in the adopted budget. Included are several initiatives that I helped to spearhead – establishing the Office of Commonwealth Resilience, a new state-wide program to combat invasive species, a down-payment assistance pilot program for low-income families, additional funding of $25 million for the Virginia Housing Trust Fund, a program to expand broadband access in hard-to-reach areas of the Commonwealth, additional funding for early childhood education, and new capital funding to upgrade wastewater treatment facilities. 

Below are some of the budget highlights! Click here for a summary by the House Appropriations staff and here for the full, searchable version of the budget.

K-12 Education

• Overall, provides $2.1 billion in general funds above the FY2024 base budget.
• Provides the state’s share of a 3% raise each year of the biennium for teachers and support positions.
• Expands funding for at-risk students, English Language Learner teachers, and reading specialists.
• Includes funding to develop and implement a modern, expanded literacy screening tool to identify student reading deficiencies more accurately.
• Expands supports for parents of special education students and instructional coaching and professional development for teachers.

Early Childhood

• Includes a $456.7 million increase over the biennium to support early childhood care and education programs.
• Ensures that families do not lose access to early childhood programs due to the expiration of federal pandemic relief funds.

Employee Compensation

• Provides for a 3% salary increase each year of the biennium for state employees, including adjunct faculty and graduate teaching assistants at higher education institutions.
• Provides $61.9 million over the biennium for targeted salary increases in areas that have struggled with recruitment and retention, including support staff at Department of Behavioral Health and Developmental Services facilities and public safety personnel (state police and correctional officers).

Higher Education

• Provides $205.4 million of increased funding over the biennium to increase access and affordability at public colleges and universities.
• Includes $55 million increase over biennium at community colleges for operating and financial aid.

Health and Human Resources

• Provides an additional $2.0 billion for health and human resources over the biennium.
• Add 3,440 Medicaid developmental disability (DD) waiver slots and provides a 3% rate increase for DD services each year over the biennium.
• Provides $10 million each year for Community Services Boards workforce development and staffing.
• Invests $10 million the first year for additional mobile crisis units.
• Invests $4 million each year for housing for individuals with serious mental illness and people with developmental or intellectual disabilities.

Public Safety and Veterans

• Includes $75.9 million over the biennium for community violence intervention initiatives.
• Provides $43.5 million over the biennium for the School Resource Officer Incentive Grant Program.
• Includes $19.1 million the first year for start-up costs at two new veterans care centers.
• Provides $1.6 million for additional paralegal positions in Commonwealth’s Attorneys’ offices.

Natural Resources, Agriculture, and Forestry

• Deposits $201.1 million in FY2025 in the Water Quality Improvement Fund.
• Substantially increases the base technical assistance funding provided to Soil and Water Conservation Districts by $3.0 million each year.
• Provides $100 million in FY2025 for the Community Flood Preparedness Fund.
• Establishes a pay-for-performance pilot program in the amount of $20 million to solicit private sector investments in nutrient reduction projects.
• Includes $20 million in FY2025 for capital improvements at historic sites and history museums in anticipation of the “American250” Semiquincentennial celebrations.
• Provides $5 million over the biennium to implement statewide coordinated invasive species management.
• Includes $400 million for improvements to wastewater treatment plants to meet Chesapeake Bay improvement targets.

Commerce and Labor

• Contains $175 million for the Virginia Housing Trust Fund to support the creation or preservation of affordable housing.
• Adds $30 million in FY2025 to help with costs related to expanding broadband access throughout Virginia.
• Invests $40 million over the biennium to support economic development through the Virginia Business Ready Sites program.

Transportation

• Includes $65 million in the first year and $84.5 million the second year for additional operating assistance for the Washington Metropolitan Area Transit Authority/METRO.
• Requires a study to explore METRO cost containment strategies.

Thank you to everyone who wrote, visited, and even testified during the 2024 General Assembly session! ​

Now that the session is over, I am happy to speak at association meetings or attend community events. My legislative assistant, Rama Van Pelt, is available during the week to help with scheduling. He can be reached at (703) 310-6752 or [email protected].