Virginia Revenue Forecast Jumps by $1.5 Billion as Budget Talks Continue

Virginia’s revenue outlook has improved by $1.5 billion over the next three fiscal years, giving lawmakers more breathing room as negotiations over a stalled state budget are set to continue in Richmond later this month.

Gov. Abigail Spanberger on Monday afternoon released the updated revenue forecast she ordered last month, telling top legislative budget writers that Virginia is projected to collect substantially more General Fund revenue through fiscal year 2028 than previously expected.

The revised forecast projects that revenues for fiscal year 2026 will exceed the official estimate by $585.5 million. Another $922.6 million in General Fund revenue is projected for fiscal years 2027 and 2028, including $582.4 million in 2027 and  $340.2 million in 2028.

The new projections arrive while lawmakers remain stuck in negotiations over Virginia’s next two-year budget, with disagreements over data center tax incentives and spending priorities continuing to hold up a final deal.

In a letter to Sen. Louise Lucas, D-Portsmouth, and Del. Luke Torian, D-Prince William — the chairs of the legislature’s money committees — Spanberger said lawmakers need updated economic information as they work toward a budget deal.

“As General Assembly leadership and budget conferees continue their important work, it is critical they have the most current and accurate information available,” Spanberger said in a statement.

“While forecasted General Fund revenues have increased, I remain concerned by rising national economic instability, the ongoing conflict in Iran, and the continued impacts of federal workforce cuts. We must account for these evolving economic conditions as we plan for the long-term strength of our commonwealth.”

The updated forecast arrives as lawmakers prepare to return to Richmond later this month for another attempt to break the budget impasse before the start of the new fiscal year.

The House is scheduled to reconvene its special session on June 18, followed by the Senate on June 22, as budget conferees continue working toward a compromise spending plan that can pass both chambers and reach Spanberger’s desk before the June 30 deadline.

The revised forecast reflects strong tax collections even as parts of Virginia’s economy show signs of slowing.

General Fund revenues have grown 7.3% on a fiscal year-to-date basis and are running 3.3% ahead of forecast. Virginia is currently $851 million ahead of expectations, though nearly 70% of that amount — about $578 million — comes from non-withheld income tax payments and individual refunds, two of the state’s most volatile revenue categories.

Virginia Secretary of Finance Mark Sickles said the revised forecast attempts to balance the state’s recent revenue growth against growing uncertainty in the national economy.

“The updated forecast confirms that the commonwealth’s revenue performance remains solid but also factors in the deteriorating economic conditions and increased uncertainty in the national outlook,” Sickles said in a statement.

“The additional $1.5 billion in updated projected revenues should provide the General Assembly with enough resources to craft a structurally balanced budget that mitigates any potential risks related to national market volatility.”

The updated forecast follows warnings from state finance officials last month that Virginia’s economy is facing slower job growth, persistent inflation, and weakening consumer confidence even as tax revenues continue to exceed expectations.

During a May presentation of the Senate Finance & Appropriations Committee, Sickles said Virginia had lost 41,900 jobs since the beginning of fiscal year 2026 while General Fund revenues remained more than $850 million ahead of forecast.

At the time, Sickles suggested the surplus could help lawmakers move past the budget stalemate.

“It would not be unprecedented for us to use some of this money to get past this impasse, if we needed to,” Sickles told the committee.

Spanberger ordered the updated forecast May 19 while budget negotiations remained unsolved. The revised projections extend through fiscal year 2031 and are intended to give lawmakers updated economic data before final spending decisions are made.

The prolonged budget standoff has raised concerns about whether lawmakers will finish work on a revised spending plan before the new fiscal year begins on July 1.

Lawmakers adjourned a special session in April without an agreement. Disputes over data center tax incentives, transportation funding, and competing priorities between the Democratic-controlled House and Senate have remained major obstacles.

The stronger revenue forecast could give negotiators additional flexibility on spending priorities, including education, transportation, healthcare, and state employee compensation. But administration officials cautioned that economic risks remain.

Federal workforce reductions continue weighing heavily on Northern Virginia and Hampton Roads, both of which have large concentrations of federal employees and contractors. State officials have also pointed to instability in financial markets and international tensions as possible threats to future economic growth.

Even with revenues ahead of forecast, Virginia officials have repeatedly noted that much of the current surplus comes from revenue streams that can fluctuate significantly from year to year.

by Markus Schmidt, Virginia Mercury

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