As Virginia budget negotiations drag on, here’s what hangs in the balance

In normal years, Virginia’s budget plan is supposed to be pretty much done by April, except for any late changes recommended by the governor.

But for the second year in a row, the politically split General Assembly is heading into spring under a cloud of uncertainty over when the budget will get done and what will be in it.

According to House Appropriations Chairman Barry Knight, R-Virginia Beach, budget negotiators are taking a deliberately cautious approach to getting a better feel for the status of the broader economy.

‘Buckle up’: Youngkin budget proposal includes another $1B in tax cuts

“We are taking our time and being very deliberate with the stock market volatility, revenues softening some and to see if the bank situation doesn’t proliferate,” Knight said in an email Wednesday, referring to possible ripple effects of the failure of Silicon Valley Bank this month.

Lawmakers are set to return to Richmond on April 12 to take up vetoes and legislative amendments from Gov. Glenn Youngkin. If there’s no budget to vote on by then, the next big deadline is June 30, when the state’s current budget year ends.

Some legislators have pointed out that the General Assembly technically isn’t required to pass a budget this year. Because the state is approaching the middle of its two-year budget cycle, lawmakers are modifying an existing plan, not creating an entirely new budget.

Still, several key priorities won’t get funded if the two parties can’t come to an agreement over the next few months. Here are a few of them:

Tax relief

For a second year in a row, Youngkin and his Republican allies have made broad tax cuts a top priority, and Democrats have again been trying to use their negotiating power to lock in more targeted relief that would help lower-income Virginians.

Democrats have made clear Youngkin’s proposal to cut the corporate tax rate from 6% to 5% is a non-starter for them. But they’ve expressed more openness to broader forms of relief for individual taxpayers, such as raising the standard income tax deduction.

Signs of strength or weakness in state revenues could be a major factor in determining how much tax relief is feasible because Youngkin has indicated he will only pursue tax cuts the state can comfortably afford.

Legislators have also floated the idea of doing another round of one-time tax rebates instead of making more structural tax cuts meant to be long-term. As part of last year’s bipartisan budget deal, the state sent out millions of tax rebate payments worth up to $250 per person.

Mental health investments

Following years of financial and staffing strain that culminated in five of Virginia’s state-run mental hospitals closing to new admissions in July 2021, Youngkin this December laid out a broad package of $230 million in reforms to the government behavioral health system.

While some of the aims in the governor’s “Right Help, Right Now” proposal can be achieved by consolidating current programs, said Virginia Department of Health Chief Operating Officer Christopher Lindsay, the numerous amendments to the current budget would be a “significant contributor” to those goals, which are generally backed by both parties. Those include money for a school-based mental health pilot, the expansion of local crisis centers that provide an alternative to hospitals for people seeking help, and higher Medicaid reimbursement rates for certain behavioral health providers.

Both budgets would also increase pay for staff at the state’s community services boards, the locally based bodies that are the primary providers of behavioral health and developmental disability services in Virginia. The House calls for an extra $37 million, and the Senate an extra $50 million.

Gov. Glenn Youngkin unveils his Right Help, Right Now plan for reforming Virginia’s behavioral health system at Henrico Doctors Hospital on Dec. 14, 2022. (Sarah Vogelsong / Virginia Mercury)

Teacher raises

Virginia, like other states, is suffering from teacher shortages, with many policymakers pointing to low pay as one driver of the vacancies. A 2019 report from the state’s legislative watchdog agency found Virginia ranked 33rd among the states in average salary for K-12 public teachers.

The House and Senate are proposing even bigger raises for public school teachers than the existing budget. Under the current budget, teachers get 5% raises, while this year’s amendments would push those up to 7%. Both chambers are also recommending that $50 million in proposed teacher performance bonuses be redirected to other goals, with the House specifically putting that money toward bigger salary bumps and calling for a workgroup to set “appropriate metrics” for teacher compensation.

Help with Richmond’s massive sewer project

Both the House and the Senate are backing a request from Youngkin to put $100 million toward the city of Richmond’s ongoing struggle to fix its 19th-century combined sewer overflow system, which routes storm runoff and sewage through the same pipes. CSO systems, which were built over a century ago in many historic East Coast cities, including Richmond and Lynchburg, cause sewage overflows into waterways whenever heavy rainfall overwhelms the network.

Lynchburg has almost completed its CSO conversion, and Alexandria’s is in full swing. But with an estimated cost of over $1.3 billion, Richmond’s project far outstrips its counterparts in both price and complexity, and the high percentage of residents living below the poverty line has limited the city’s ability to cover costs through rate increases.

The James River in Richmond near Brown’s Island. (Sarah Vogelsong / Virginia Mercury)

Hiring more reading and literacy specialists

After sharp drops in reading test results during the pandemic, both chambers have proposed hiring more literacy coaches and reading specialists to help students. House and Senate amendments would allocate $6.7 million to expand the state’s literacy program, which currently covers students up to grade 3 through eighth grade. Both also call for the hiring of more reading specialists, with the Senate proposing more than $27 million and the House almost $14 million for the initiative.

Increased funding for the state’s Business Ready Sites Program

One of Youngkin’s biggest spending priorities was $450 million to boost the state’s supply of economic development sites that could make the state more attractive to big employers looking for somewhere to build.

That funding became a sticking point for budget negotiators late in the regular session, according to the Richmond Times-Dispatch, and it remains unclear how legislators will resolve their differences.

School security grants

Both budgets call for ramped-up spending on school security. The Senate is proposing an extra $50 million in grants for that purpose, while the House is suggesting $12 million be diverted from the Lottery Fund for school security grants, $8 million go toward hiring more school resource and school security officers and $1.5 million go toward security renovations at two elementary schools in Newport News, including Richneck Elementary, where a 6-year-old shot his teacher in January.

Statewide housing needs assessments

While their numbers differ, the House and Senate budgets both provide funding for a statewide housing needs assessment. As home prices rise faster than inflation and many areas of the state see ongoing shortages of affordable housing, the two chambers backed legislation this session to direct the Department of Housing and Community Development to conduct a comprehensive review of the state’s housing stock and need every five years. The Senate proposes $400,000 for the effort, while the House proposes $500,000.

Building construction, Richmond, Va. Parker Michels-Boyce for The Virginia Mercury

An inland port in Southwest Virginia

Both budgets include substantial new funding for the Virginia Port Authority to begin the process of building an inland port in Southwest Virginia’s Mount Rogers Planning District.

The state currently has an inland port in the northern Shenandoah Valley, and proponents of adding a second logistics hub in Southwest Virginia say it could increase the flow of cargo and boost business development in the area.

The House budget includes $55 million for the project. The Senate budget allocates $10 million.

Jury duty pay

Lawmakers passed a proposal this session to raise jury duty pay from $30 per day to $50 per day after initially considering compensation as high as $100 per day.

Youngkin signed the bill setting the new amount at $50, but nearly $1.4 million in new funding to help the courts system cover those costs depends on the budget being approved.

by Sarah Vogelsong, Virginia Mercury

Virginia Mercury is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Sarah Vogelsong for questions: info@virginiamercury.com. Follow Virginia Mercury on Facebook and Twitter.