The Republican-controlled Virginia House and Democrat-controlled Senate on Thursday each passed their own budgets, substantially different spending plans that negotiators will meld into compromise legislation in the coming weeks.
The two budgets for fiscal years 2022-2024 contain some similarities, including raises for state and state-funded employees and deposits to the state's reserves and retirement system. But a key difference — an approximately $3 billion discrepancy with regard to tax policy — also results in different allocations to certain government services and initiatives.
Lawmakers also passed legislation with adjustments to the 2020-2022 budget. Each chamber will now take up the other's plans before the legislation heads to a conference committee. Negotiators will have to hash out a compromise before the spending plans can go to Republican Gov. Glenn Youngkin, who could also seek amendments.
“This is just the beginning," Youngkin said in a statement earlier in the week when the measures cleared their respective committees. "I look forward to hosting House and Senate Leadership and the budget conferees to a meeting on Friday ... so we can sit down together and get to work.”
Here is a look at points of agreement, differences and items of interest in the two chambers' bills:
Taxes and Reserves
At a time when the state's tax collections are soaring — $13.4 billion in unanticipated revenue is expected to be collected in this budget cycle, according to Youngkin's office— both chambers have agreed to return some of that money taxpayers. But they disagree on how much and in what form the tax relief should come.
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The House approach largely aligns with Youngkin's campaign proposals, including offering one-time rebates, suspending the recent gas tax increase, reducing taxes on veterans' retirement pay, fully eliminating the sales tax on groceries and doubling the standard deduction. The proposals would amount to an estimated $5.3 billion in tax relief over the biennium.
The Senate has sought a narrower approach that would amount to $2.5 billion of relief over the two years, about $1 billion of that in one-time rebates. The Senate also agreed to eliminate part of the grocery tax as well as the veterans’ retirement changes. It added $47 million for housing tax credits to expand affordable housing but balked — on a bipartisan basis — at doubling the standard deduction, which the chamber instead voted to study.
Youngkin has praised the House version and said that while the Senate “does not include nearly enough tax relief” it also included “commonsense, bipartisan priorities on which we can find common ground.”
State Employee Compensation
Both chambers' budgets included pay raises for public workers.
The Senate version would spend about $2.2 billion on 5% pay raises in each year for state and state-supported local employees, including teachers, plus $1,000 one-time bonuses.
The House bill allocates about $1.7 billion for 4% raises each year plus two 1% bonuses.
Both chambers' plans include substantial deposits to the Virginia Retirement System, as well as the state's reserves.
Both budgets would increase total funding for K-12 schools, but they differ in a variety of ways.
The House calls for $150 million in funding for “lab schools,” where colleges and universities partner with K-12 school systems. The Senate didn't fund the proposal, which Youngkin has made a priority.
Both provide extra funding for an “at-risk add on program” that sends money to districts with high percentages of students living in poverty, though the House offers comparatively less.
Both also provide some funding for school construction and modernization, with the Senate offering $500 million in one-time grants and the House adopting an approximately $542 million loan rebate program to help districts pay off borrowing for such projects.
Both chambers want to spend more than $100 million to supplement an existing economic development program aimed at promoting and developing industrial “megasites” capable of hosting major industrial employers.
A 2019 Associated Press review found the state had already sunk more than $100 million into land acquisition and development at a handful of such megasites with little to show for it. But economic development officials say without ready-to-go sites, the state will continue to miss out on transformational economic development opportunities.
Both chambers are proposing $8.5 million to support a medical-grade glove manufacturing facility in southwest Virginia that's promising to create 2,500 new jobs as well as $1 million for a proposed Slavery and Freedom Heritage Site in Richmond, according to money committee documents.
The Senate budget also revives a debate over whether the capital city should get another chance to hold a voter referendum on whether to allow a casino to open.
Earlier in the session, lawmakers defeated measures that would have blocked another Richmond referendum on the matter while allowing the city of Petersburg to host one. Language in the Senate budget would authorize a study of the possibility of a Petersburg casino, while preventing Richmond from holding another referendum until November 2023.
Legislation that advanced from both chambers Thursday included more than $100 million to backfill the state's unemployment trust fund, which pays benefits for laid-off workers.
The supplements — $110 million in the Senate legislation and $180 million in the House both using federal American Rescue Plan Act funds — are intended to keep employers' taxes from rising.
The Senate also has proposed $500,000, according to committee documents, to initiate a comprehensive efficiency review of the Virginia Employment Commission, where long-running problems have been on display amid the agency's response to the surge of claims during the pandemic. Such a review was a recommendation of the legislature's watchdog agency, which studied the VEC response last year and found a wide range of problems.
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