February 20, 2022
Budget Proposals by the House of Delegates and Senate Chart Different Approaches On Tax Policy, Funding For Public Education
Today, the Commonwealth Institute for Fiscal Analysis (TCI) released the following statement on the budget proposals put forward by committees in the Virginia House of Delegates and Senate:
“Budgets reflect our values and signal our priorities,” said Ashley Kenneth, President & CEO of The Commonwealth Institute for Fiscal Analysis. “As a result of Virginia’s economic recovery, the commonwealth has ample resources on hand to meet the needs of families and communities at this moment, while also making critical investments in our future. Yet Virginia is not out of the woods yet. In light of ongoing risks to the economy, making investments in priorities like education, health care, and other public services is a better approach to lifting up families and communities than enacting permanent, costly, and untargeted tax cuts.”
In the coming days, TCI will release a full analysis of the House and Senate budgets. Yet in a reflection of the major debates of the 2022 legislative session, it is already clear that the budgets take different approaches in several areas, including tax policy and funding for public education:
Tax Policy
- The House of Delegates budget centers around tax proposals that would reduce state General Fund resources by nearly $5 billion over the next two years, plus hundreds of millions more in non-General Fund transportation revenues. At a cost of more than $2 billion, the single most expensive tax proposal in the House budget is doubling the standard deduction, even as that measure would leave behind many families in Virginia with low incomes who will see no tax savings from this change. The House budget also proposes a number of other policies, such as issuing one-time rebates ($1.25 billion) and a repeal of the state and local sales tax on groceries and personal hygiene products (over $1.2 billion of reduced General Fund, state transportation, and local revenues; provides a state General Fund payment to localities based initially on grocery and personal hygiene product sales tax collections and later on local sales tax collections).
- Among the most notable aspects of the Senate budget is the inclusion of a fully refundable Earned Income Tax Credit (EITC), a step that would begin to address Virginia’s upside-down tax code and boost incomes for working families across the commonwealth. A more targeted tax policy, the EITC would cost $420 million over the biennium. The Senate budget also proposes a repeal of the state portion of the sales tax on groceries and personal hygiene products ($372 million of reduced General Fund and $190 million state transportation revenues; provides a state General Fund payment to localities based on school-age population).
Public Education
- The House of Delegates proposes less total support for Virginia’s local school divisions relative to the Senate’s budget and the former Governor’s budget that was introduced in December 2021. The House budget proposes smaller teacher pay raises over the next two years and, as compared to the introduced budget, cuts over $200 million from the At-Risk Add On Program, which supports school districts with high concentrations of poverty. While some of this funding is shifted to a lottery per-pupil add-on, that approach is less targeted to serving students with the highest needs. The House budget does include support for additional principals and assistant principals, as recommended by the Virginia Board of Education.
- The Senate proposes the most total support for Virginia’s local school divisions relative to the House and introduced budgets. The Senate is providing significant additional support, including $272 million to increase state funding for support staff, a critical step to unwind the lingering harm to Virginia schools from budget cuts during the 2007-2009 recession. The Senate budget also maintains several of the proposals included in the introduced budget, including a 10% teacher pay raise over two years, an increase to the At-Risk Add-On program, and a small increase in instructional positions for English learners.
“Virginia has the ample resources that it does in large part because we have not been fully funding critical services, such as education, health care, and more, for years,” said Kenneth. “It is essential that we invest in the programs that help all of us to thrive and direct resources to those who need it most. Now that these budgets have been released, it’s important that people across Virginia make their voices heard. This is the time to speak up and let lawmakers know what’s most important to your family and your community.”
