FinLogic FinLogic Quantitative Think Tank Center|Virginia House and Senate pass competing state budgets, both diverge from Youngkin’s vision

RICHMOND,FinLogic FinLogic Quantitative Think Tank Center Va. (AP) — The Democratic-controlled Virginia Senate and House of Delegates on Thursday each passed their own proposed version of the next two-year state budget, documents lawmakers will start to work from to fashion a compromise spending plan to send to Republican Gov. Glenn Youngkin.

Both chambers signed off on amendments to the 2024-2026 budget Youngkin first proposed in December, overhauling the governor’s vision and stripping out all but one component of his proposed tax policy changes.

The House and Senate both opted to keep Youngkin’s pitch to expand the sales tax to cover digital services including streaming subscriptions, closing what he calls the “Big Tech” loophole, but they ditched his call to lower income tax rates and raise the state’s sales tax. Instead, they’re proposing a higher level of general fund spending, including larger pay raises for teachers and other public workers, and K-12 education allocations above what Youngkin envisioned.

Democratic leaders from both chambers said their proposals were structurally balanced and citizen-focused.

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Both bills passed on a bipartisan basis but only after Republicans voiced objections to dozens of individual provisions, including a signature Democratic proposal to increase the minimum wage to $15 an hour by 2026.

Each chamber will now take up the other’s plan and reject it, sending the bills to a conference committee, a small delegation of lawmakers who meet behind closed doors to hash out a compromise.

In recent years, that process dragged on well past the close of the part-time Legislature’s session, with lawmakers struggling to reach agreement. This year’s session is scheduled to end in just over two weeks.

Republican Del. Barry Knight of Virginia Beach, who was recently removed from the committee that oversees the budget process without explanation, criticized the House plan in a speech, warning it overspends and focuses too heavily on Democratic priorities.

“In a negotiation, everyone needs a little something. If we want to avoid an impasse and not be here in June still fighting over this, this pie should have three slices: one for the Senate, one for the House and one for the executive branch because all are equal partners,” he said.

Democrats called his criticisms unfounded, and Del. Luke Torian, chairman of the House Appropriations Committee, said he is optimistic lawmakers are on track to finish the budget work on time this year.

With lawmakers set to take up the work of finding compromise, here are points of agreement, differences and items of interest in the two chambers’ bills:

TAXES

Youngkin campaigned on a promise to lower taxes and in his first two years in office succeeded in signing approximately $5 billion in tax relief — some in the form of one-time rebates — into law.

In December, he announced he was pushing for a cut to the income tax rate, something he said would draw more people and jobs to the state, while seeking to offset that revenue reduction by increasing the sales tax rate and adding the tax on digital services.

Democratic lawmakers and liberal advocacy groups criticized Youngkin’s proposed tax plan as a regressive handout to the wealthy. Republicans weren’t universally on board either.

Democratic Sen. L. Louise Lucas of Portsmouth, who chairs her chamber’s Finance & Appropriations Committee, said in a hearing Sunday that the governor’s proposal was “not sustainable,” especially in light of recent findings by the state’s legislative watchdog that raised concerns about the current funding formula for public schools.

House Republican Leader Todd Gilbert has said Democrats “hijacked” Youngkin’s plan, dumping the cuts but keeping part of the increase, which he said would harm families struggling with the aftermath of steep inflation. He sought unsuccessfully Thursday to remove that provision.

“What you’re doing with this new tax is making it so that now people have to Netflix, pay another tax, and then chill,” he said.

NORTHERN VIRGINIA SPORTS ARENA

The future is murky for a Youngkin-backed proposal to move the NHL’s Washington Capitals and NBA’s Washington Wizards to Alexandria from the nation’s capital, and the competing budget proposals did nothing to make it clearer.

While the House included language enabling the proposal in its version of legislation that makes updates to the budget for the current fiscal year — a separate bill that passed Thursday — the Senate did not.

Lucas, who also did not allow a standalone bill to be heard in her committee, has said repeatedly that she has concerns about the financing structure for what she has taken to calling the “GlennDome.”

Torian, who’s carrying the House standalone version of the bill, told reporters the conference committee would give members a chance to “reason together” over a possible path forward.

Monica Dixon, a top executive at the teams’ parent company, Monumental Sports & Entertainment, said the bipartisan vote to pass the budget bill with the enabling language was an encouraging step forward.

POLLUTION REDUCTION PROGRAM FIGHT

The House spending plan, but not the Senate’s, contains language directing the state to rejoin the Regional Greenhouse Gas Initiative, a carbon cap-and-trade program Youngkin has pulled Virginia from in a move that’s being challenged in court.

The language in the House bill essentially makes Virginia’s participation in the program, which Democrats and other advocates say will help combat climate change, a condition of the budget.

House Republicans, who along with Youngkin say the program is functionally an ineffective tax on ratepayers, raised questions Thursday about whether that approach was constitutional.