Va. lawmakers reshape Youngkin’s final budget with focus on affordability, no new taxes
The Virginia General Assembly’s money committees on Sunday rolled out sweeping amendments to former Gov. Glenn Youngkin’s proposed two-year, $212 billion state budget, with both the House and Senate advancing plans that emphasize affordability, backfill federal funding gaps and avoid new taxes as they reshape the Republican’s final spending blueprint.
The Senate Finance Committee’s Senate Bill 30 would end a data center sales tax exemption and set the stage for the state to potentially reap millions in revenue from the industry.
The spending plan would also deliver $100 in tax rebates to individual filers and $200 to joint filers, raise the standard deduction, protect Medicaid, fund 3% annual teacher raises, invest $50 million in affordable housing and provide $205.7 million for Metro over the biennium.
The House Democratic plan, branded the “Affordable Virginia Budget,” similarly prioritizes housing, health care and education, but diverges in some spending details — including larger direct investments in the Virginia Housing Trust Fund and a broader package of worker protections and labor initiatives.
Both chambers are expected to pass their respective proposals next week — the House on Thursday — before negotiators reconcile differences in a conference committee in the coming weeks.
Notably, neither plan includes new taxes, which prompted Sen. Richard Stuart, R-King George, to vote for the Senate budget in committee, while three of his Republican colleagues abstained.
“I can’t tell you how much I appreciate the fact that there are no tax increases in this budget, that you’ve kept a very conservative forecast of revenues going forward, that we have not built the base budget, but we’re using one-time monies,” Stuart told Senate Finance Committee Chair Louise Lucas, D-Portsmouth.
“But more than that, I’ve been here for a long time, and you are the first Finance chair that I remember that actually took and listened to our considerations and our suggestions, and I very much appreciate that. And I just wanted to say that Madam Chair.”
Lucas, visibly surprised, replied: “Thank you very much, I really appreciate that compliment, I didn’t see that one coming. Where are the tissues?”
Reworking Youngkin’s final budget
Youngkin on Dec. 17 unveiled his final proposed budget, pitching a plan he said built on record revenue growth and sustained his administration’s tax-relief priorities as Democrats prepared to take control of both the General Assembly and the governor’s office.
The proposal anticipated continued economic strength, with what Youngkin described as a “prudent” revenue forecast rooted in job and business growth. It preserved reserve balances while advancing nearly $730 million in new, ongoing tax cuts and maintaining income tax conformity with recent federal policy changes.
On the spending side, Youngkin targeted public safety, health care and education, including bonuses and salary increases for teachers and state employees, while projecting a balanced budget over the six-year forecast window. He acknowledged at the time that his successor and the Democratic-led legislature would ultimately reshape the plan.
Senate Democrats argued Sunday that his outgoing proposal left “significant structural deficiencies,” particularly by not planning for new federal cost shifts under HR1, including potential state matching requirements for food assistance.
Lucas said the Senate amendments were built around affordability and long-term fiscal balance.
“It’s the entire mantra of this session,” she said. “The committee has delivered a budget focused on affordability, while still maintaining structural balance.”
Data centers and tax cuts
A central change in the Senate plan would allow the data center sales and use tax exemption to end on Jan. 1, 2027. Originally projected to cost $1.54 million annually, the exemption now forgoes roughly $1.6 billion per year in revenue, according to Senate Democrats.
“In the most recent fiscal year alone, they benefited from more than $33.2 billion dollars in tax-free computer equipment purchases,” Lucas said. “We’re asking data centers to pay their fair share in sales tax to help deliver our core services — education, transportation, and social services.”
By ending the exemption, the Senate would direct nearly $300 million to transportation across all modes and make one-time investments in water infrastructure, Lucas said, while avoiding additional tolls or fees.
The Senate plan also includes a one-time tax rebate to be issued around Oct. 15 and increases the standard deduction by $450 for individuals and $900 for married filers.
“By exempting more income from taxation, Virginians get immediate relief in their paychecks. That’s affordability,” Lucas said.
Health care and federal uncertainty
Health and Human Resources Subcommittee Chair Creigh Deeds, D-Charlottesville, said the Senate confronted rising Medicaid costs projected at $3.2 billion in general fund spending through fiscal 2028.
Medicaid and the Children’s Health Insurance Program cover 1.8 million Virginians, he said. The subcommittee adopted $591.2 million in savings strategies and set aside a $90 million reserve while restoring the prenatal care program.
With enhanced federal Affordable Care Act tax credits having expired Dec. 31, Deeds warned that up to 100,000 Virginians could lose coverage. The Senate includes $200 million in the first year to subsidize premiums.
The House proposal similarly emphasizes backfilling federal reductions.
Health and Human Resources Subcommittee Chair Rodney Willett, D-Henrico, said the House recommends $79.1 million to reduce premium spikes, $45 million to restore federal reductions for core public health services and more than $211 million to cover new state cost shares for SNAP benefits.
“We feel it is a prudent and responsible decision to act now,” Willett said, to ensure uninterrupted access to food benefits.
The House plan also includes $11.1 million for a sickle cell disease package and funding to improve maternal and infant health programs.
House Appropriations Committee Chair Luke Torian, D-Prince William, said his chamber’s budget “backfills those holes, not out of politics, but out of prudence.”
“This is a balanced budget,” Torian said. “It is built on conservative revenue assumptions, maintains healthy reserves, and prepares us for continued uncertainty ahead.”
Education and housing
On education, the Senate proposes 3% raises each year for teachers and state employees, along with $50 million for a childcare pilot to match employer contributions.
Education Subcommittee Chair Mamie Locke, D-Hampton, said the Senate plan adds more than $627 million in general fund support over the biennium, including increased funding for at-risk students, special education and school construction through a 1% local option sales tax for renovation projects, pending local referendums.
In higher education, the Senate recommends $159.4 million in additional funding, including $65 million for need-based financial aid and $32.5 million for workforce credential grants.
The House budget also invests heavily in K-12 and early childhood education.
Elementary and Secondary Education Subcommittee Chair Delores McQuinn, D-Richmond, said it includes $400 million in one-time flexible funding for school divisions and $160 million in additional special education support, along with $160 million for early childhood education to clear childcare waitlists for families earning below 85% of the state median income.
On housing, the Senate wants to invest $50 million in its housing trust fund and $13 million for eviction prevention, while the House directs $187.5 million to the Virginia Housing Trust Fund, establishes a $25 million revolving loan fund for mixed-income housing and provides $17 million for eviction prevention.
Balancing new revenues
Anne Oman, staff director for the House Appropriations Committee, said the caboose budget signed by Gov. Abigail Spanberger on Friday increased current-year general fund resources by $3.1 billion, leaving $2.3 billion to carry into the new biennium.
The proposed budget assumes modest 3% to 3.5% annual revenue growth, though year-to-date collections are running at 6.9%.
Adjustments eliminate Youngkin’s proposed tax cuts, capture nearly $80 million from a business-ready site acquisition fund and recognize potential revenue from skill games legislation, projected at about $176 million annually if enacted.
After accounting for $1.8 billion in additional spending, the House plan leaves an unappropriated balance of $15.2 million at the end of the biennium, Oman said.
Despite bipartisan moments, some Republicans voiced caution.
“I want to say thank you to you,” Senate Minority Leader Ryan McDougle, R-Hanover, told Lucas. “This has been a challenging process, and I appreciate the fact that you and I can have candid conversations as we’ve worked through this.”
He added: “Today, I am going to vote to abstain, because of some of the significant physical impacts that I’m concerned about in Virginia as we continue to discuss. This budget has a significant amount of additional revenues up and above the proposed budget, and I think we need to have a serious conversation about where those revenues come from, how they impact Virginians, and continue to discuss them as we go forward.”