December 20, 2023
Governor’s budget proposal falls short of meeting community needs, prioritizes the wealthy
Correction: A previous version of this statement said the governor’s proposal relies on $3.8 billion in one-time funds leftover from prior years to balance the budget. This has been corrected to $3.2 billion.
Ashley C. Kenneth, President and CEO of The Commonwealth Institute for Fiscal Analysis (TCI), released the following statement regarding Governor Youngkin’s proposed budget:
“Virginia’s families and children deserve a budget that provides broad and holistic support, recognizing the many different barriers they face, while also investing in their communities and their futures. Throughout the year, The Commonwealth Institute has heard directly from community leaders from across Virginia about what families want to see in our state’s budget and, unfortunately, today’s budget proposal falls short of meeting the moment.
“While there are some worthy investments in the governor’s proposal, we should be using all available resources to make transformational investments in the building blocks of our communities like public schools. Instead, the governor is proposing harmful permanent tax cuts that would forfeit billions in shared resources, including cutting the top tax rate from 5.75% to 5.10%, giving generous tax cuts to high-income filers. A high-end lawyer with $2 million in income would have their income taxes go down by about $12,853 under this proposal. Virginia’s tax code is already upside down, with the wealthiest paying the least taxes as a share of income, and this proposal would allow the wealthy to further avoid paying their fair share.
“The governor partially makes up for those forfeited funds by increasing the state sales tax, which asks more of families with lower incomes who spend higher proportions of their incomes on necessary goods, doubling down on Virginia’s upside-down tax code. Instead of asking the wealthy to pay their fair share so that we can fully invest in our communities, the governor’s proposal cuts state support for school construction and modernization and breaks the state’s commitment to help schools and local governments with the cost of eliminating the sales tax on groceries and personal hygiene products. To make matters worse, the governor’s proposal relies on $3.2 billion in one-time funds leftover from prior years to balance the budget, creating the risk that Virginia will hit a “cliff” in the 2026-2027 budget year if future revenue does not grow much faster than expenses.
“Our state budget should reflect who and what we value as a commonwealth. What is most telling about the governor’s values is what is missing from this proposed budget.
“The governor failed to:
- Lift the arbitrary cap on state funding for support staff or make any other progress on the funding recommendations from Virginia’s independent research agency to address $4 billion in underfunding for our K-12 public schools.
- Create a Commonwealth Kids Credit to help families struggling to make ends meet.
- Make sure every kid in our commonwealth, regardless of immigration status, has access to health care coverage.
- Address housing affordability by investing in Virginia’s Affordable Housing Trust Fund.
- Improve the state’s Earned Income Tax Credit in a way that would help families who are struggling the most to make ends meet.
“We know that lawmakers can and must pass a budget that goes above doing the bare minimum for families, particularly low-income Black and brown families who are most harmed by underinvestment in public services.
“As Virginians consider the governor’s proposed budget, we caution that the usual go-to source for understanding the governor’s proposed changes, which is the Department of Planning and Budget’s narrative and tabular explanation of all changes, appears to be based on the “skinny” budget that was approved in spring 2023, rather than the current budget (Chapter 1, Acts of Assembly 2023 Special Session I) that was approved in September 2023. For example, the DPB section on direct aid for public education shows a general fund increase of $403 million in FY25 and $549 million in FY26, however, the governor’s general fund proposal for the upcoming year (FY25) is actually $156 million below current levels as approved in current law (Chapter 1, Acts of Assembly 2023 Special Session I) and the following year’s funding is $138 million less than current-year funding.
“Thankfully, this budget proposal is just the start of the conversation. We look forward to working with budget leaders throughout the legislative session to consider options that would raise the revenues we need to invest in a brighter future for all of us.”