Earlier today, Governor Youngkin provided his proposed budget amendments to the current 2024-2026 biannual budget. The Virginia General Assembly will gavel in for the 2025 Session on Wednesday, January 8, 2025. This year is a short Session, which means the General Assembly will be in Session for forty-six days. The single most impactful bill every year is the budget, and this year is no different. Below are highlights from the Governor’s presentation to the Joint Meeting of the Senate Finance & Appropriations, House Appropriations, and House Finance Committees.
Taxes/Economy
Market-Based Sourcing: The Governor seeks to update the Commonwealth’s tax collection process by switching to market-based sourcing. This is a method of tax collection where sales are attributed to the location where the customer receives the benefit of the goods or services rather than where the goods are shipped from or where the seller is located. Virginia is one of twelve states that currently does not use this method.
Car Tax Relief: Providing relief from the car tax has long been discussed from both sides of the aisle. The Governor’s budget seeks to address this issue by creating a $1.1 billion fund for income tax credits—individual taxpayers earning $50,000 or less will qualify for $150 in tax credits. Joint filers will qualify for $300 if their income is $100,000 or less.
No Tax on Tips: The Governor’s budget seeks to exempt service tips from Virginia’s state income tax. This proposal is anticipated to return $70 million annually to taxpayers. The Virginia Department of Taxation and the Virginia Employment Commission estimate that more than 250,000 Virginia workers receive tips as part of their employment.
Standard Deduction: The General Assembly increased the standard deduction from $3,000 for single filers and $6,000 for couples to $8,500 and $17,000, respectively. This change expires on January 1, 2026. The Governor has proposed making Virginia’s current standard deduction permanent.
Business-Ready Sites: The Governor announced $50 million in additional funds for business-ready sites.
IT Projects: There is over $227 million for proposed updates to the state’s IT projects, which include an integrated revenue management system for the Department of Taxation, the Department of Education’s student testing system, and cyber security.
Education
Support for Schools: The Governor proposed $290 million for school construction and modernization and $550 million in direct aid for schools.
Virginia Military Survivors and Education Program (VMSDEP): During the Summer, there were numerous meetings regarding the long-term feasibility of VMSDEP. This program is designed to provide educational benefits to the surviving family members and dependents of military service members who are killed in action, are permanently disabled due to service, or are classified as missing in action. The Governor announced an additional $120 million and long-term sustainable funding from VA529 surpluses. No policy changes on how the program is implemented were presented.
Virginia Opportunity Scholarship Fund: This new fund will be infused with $50 million. K-12 students whose families are at or below the federal limit to qualify for free school meals are eligible to apply for a $5,000 yearly grant for education needs at private schools. This allocation will fund 10,000 students.
Lab Schools: The budget allocates $25 million for lab school funding to partner with Virginia’s Historically Black Colleges (HBCUs).
Higher Education: The Governor provided no new operating funds for Virginia’s colleges and universities. There is a cap on tuition increases of 2.5%. The Governor called on institutions of higher learning to find savings.
Healthcare
Temporary Detention Order (TDO): Following a pilot program, $35 million is budgeted for special conservators of the peace to transfer custody while individuals are at private hospitals awaiting placement.
Maternal Health: The budget allocates $4 million to improve maternal health by expanding perinatal health hubs, increasing funding for psychiatric and obstetric-gynecological residencies, adding doulas and community health workers, and launching a statewide education campaign.
Natural Resources
Disaster Assistance Fund: Following the tragic events of Hurricane Helene, the Governor has moved to invest $127 million to establish the Disaster Assistance Fund at the Virginia Department of Housing and Community Development (DHCD). This fund is intended to fill gaps in recovery funds. This investment comes from $25 Million in General Fund monies and $102 Million from the Regional Greenhouse Gas Initiative (RGGI) 2023 Final Payment and Interest.
Clean Water: $50 million is allocated for Richmond’s combined sewer overflow project, $17.4 million is budgeted for wastewater treatment projects, and $26 million is proposed for Agriculture BMPs.
Public Safety
Sanctuary Cities: The Governor stated that localities that implement policies that impede communication with ICE regarding the release of illegal immigrants who have committed a crime and are subject to an ICE detainment order will lose their funding.
School Resources Officers: An additional $6.8 million for school resource officers.
Link to the Governor’s Joint Money Committee Speech: December- Joint Money Committee Speech | Governor.Virginia.gov
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