Virginia Democrats Released Their Budget Plans. What’s In and What’s Out?

Gov. Glenn Youngkin’s yearslong push for tax cuts is still running up against stiff opposition in the General Assembly. His marquee proposal to bring a professional sports arena to Northern Virginia has gotten a mixed reception. And Democrats are still eager to show they’re doing more to boost funding for the state’s K-12 schools.

There are not many big items the Republican governor and the Democratic legislature are going to agree on this year. But they have to reach a deal on a new, two-year budget, and the process of working out those details entered a new phase Sunday as Democratic leaders released their counterpoints to the budget Youngkin introduced late last year.

Virginia’s new General Assembly Building in downtown Richmond opened just before the 2024 legislative session. (Graham Moomaw/Virginia Mercury)

The complete texts of the budget bills Democrats advanced Sunday were not yet available Monday but are expected to be released this week.

Here are some high-level priorities Democrats laid out in their initial budget remarks and presentations:

House and Senate split on arena, Metro funding

The House budget includes language necessary to advance the pending economic development deal that would create a new sports arena in Alexandria that would be the home of both the Washington Wizards and Washington Capitals. Specifically, the language would create the Virginia Sports and Entertainment Authority, a new public body that would help finance and oversee the arena project.

The Senate, which didn’t pass legislation that would pave the way for the deal, didn’t put the arena in its budget. That reflects the anti-arena stance taken by Sen. Louise Lucas, D-Portsmouth, who chairs the Senate Finance and Appropriations Committee.

“We’re not going to let billionaires build their fortunes on the backs of our taxpayers’ dollars,” Lucas told reporters after Sunday’s budget presentations.

The arena deal envisions the authority issuing $2 billion in bonds to fund the project, with those bonds repaid through future revenues generated by the arena and nearby development. There is no upfront state investment in the deal, which means its inclusion in the budget doesn’t require lawmakers to majorly reallocate funds or raise taxes to pay for it.

Several Democratic senators from Northern Virginia have indicated they’re still open to an arena deal, but whether it makes it into the final budget will depend on whether they can come to an agreement with Youngkin.

In a transportation funding debate tied to the arena, the House proposed $249.5 million over the next two years for the Washington Metropolitan Area Transit Authority, which operates the Metro transit system, to address its budgetary shortfalls.

Youngkin did not propose any additional funding above what Virginia pays the authority but would allow Virginia to give more if Metro provides a corrective action plan by Nov. 30 that includes cost-cutting measures.

The Senate did not propose additional funding above what the state provides for the agency. Still, the upper chamber recommended leaders and the governor’s administration continue discussing financing around Metro and commuter changes post-pandemic. In addition, Senate budget writers recommended enhanced reporting and consultation requirements and temporarily lifting the cap on the allowed budget growth for the Metro system.

Tax cuts: out. Taxing digital goods and services: in.

Although Youngkin told the General Assembly this January that his wide-ranging tax reform plan was “a package deal” and he was “only interested in a plan that reduces taxes for Virginians,” both the House and Senate have ignored those desires.

Youngkin budget calls for income tax cuts, sales tax increases

Neither chamber’s budget proposal includes the across-the-board 12% income tax cut the governor sought or a bump in the state sales tax meant to partially offset it. On Sunday, Lucas called the cuts “not sustainable,” citing a state commission’s July findings that Virginia is underfunding local school districts.

But the House and Senate are embracing Youngkin’s push to close what he has called the Big Tech loophole by extending the sales and use tax to digital goods like software packages, digital downloads, and streaming services.

“On this, the governor was correct,” said House Appropriations Chairman Luke Torian, D-Prince William Sunday. “It makes no sense to pay sales tax when you buy a Blu-Ray disc but don’t pay a tax when you download the same movie from a digital retailer.”

The House GOP is characterizing the rejection of Youngkin’s proposed income tax cuts as “a $1.3 billion tax hike.” And the governor has signaled he hasn’t given up on the idea: In a Sunday evening statement, he said he would be reviewing the plans “through the lens that … Virginians can’t afford another tax increase and, in fact, need additional tax relief.”

Big education spending

Democrats’ House and Senate proposals greatly increase education spending above the levels envisioned by Youngkin, which they say is needed to fill gaps in state funding to local divisions.

“The recent JLARC review of our funding formula demonstrated the need to modernize and update how we fund public education,” said Sen. Mamie Locke, D-Hampton, referring to the Joint Legislative Audit and Review Commission. “It also has become apparent that we must do more to address teacher salaries to ensure we have a high-quality system of education for our students.”

Both chambers are proposing incremental salary increases for teachers — 3% in the Senate and 3.375% in the House — to bring Virginia’s average teacher salary up to the national average in coming years. A House presentation Sunday specified the national average would be based on figures from the National Education Association, the primary teacher’s union in the U.S., and school divisions would have to provide at least 2% increases to access the state funding.

Youngkin’s plan includes a 2% salary increase for teachers.

Other major spending priorities include hundreds of millions extra for the state’s at-risk add-on, a bucket of money used to supplement funding to school divisions with high numbers of economically disadvantaged students. The House would put an additional $384 million toward that priority over the next two years, while the Senate would devote $200 million.

Agreement on early childhood care funding

Youngkin made early childhood care a centerpiece of his budget proposal, calling for $412 million over the next two years for the state’s child care subsidy program to maintain current levels of care even as federal pandemic relief funds disappear.

Both the House and Senate are embracing that proposal, with Locke saying Sunday the Senate “affirm[s] the funding provided in the introduced budget to support early childhood care and education and recommend[s] maintaining the current service level in the second year.”

A fresh push for RGGI participation

Democrats and Republicans have been squabbling over whether Virginia should be part of the multistate carbon market known as the Regional Greenhouse Gas Initiative, or RGGI, for years. Youngkin vowed to withdraw Virginia even before he took office and did so through regulation at the end of last year, although environmental groups are fighting the move in the courts.

This year’s House budget would direct the state to rejoin RGGI and projects $100 million in revenues from participation over the biennium. While Lucas has said the Senate budget doesn’t include that language, the chamber spent much of the past two years defending Virginia’s participation as a “brick wall” issue.

Mercury reporter Nathaniel Cline contributed to this story.

by Graham Moomaw, Virginia Mercury

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