Building Opportunity: A Racial Equity Analysis of Virginia’s 2026 Budget Choices

Every person in every community deserves to have what they need to thrive. Yet historic and ongoing discrimination has created barriers that continue to limit opportunity for many Black and Latino people in Virginia. Our state budget can be a tool to address these harms by shaping how Virginia raises revenue and invests in our communities so that everyone has access to the building blocks of thriving communities. This year, lawmakers passed a two-year budget that took effect July 1. Below, we highlight where the new budget takes steps to advance racial equity and where more work remains.

Explore:

• Tax and Revenue
• Labor and Wage
• Education
• Decriminalization of Poverty
• Health Care
• Social Services
• Housing
• Environmental Justice
• History and Representation

Tax and Revenue

Virginia’s tax code is upside down, where people with low incomes pay a larger share of their income in state and local taxes than the ultra-wealthy. Because historic and ongoing discrimination has created barriers to educational opportunity and good-paying jobs, Black and Latino families in Virginia are more likely to have lower incomes. As a result, taxes that do not fully account for ability to pay, such as sales and property taxes, have a bigger impact on the budgets for many Black and Latino families. Building a more equitable tax code means asking wealthy households and corporations to pay their fair share, strengthening tax credits that help families with low incomes, and ensuring Virginia has the revenue to invest in our communities.

Lawmakers took several actions through the compromise budget that affect tax fairness and racial equity:

• Raised additional revenue from data centers. The budget created an additional temporary electricity consumption tax on data centers, whose operators include some of the world’s largest corporations. While the new tax is capped at $600 million a year and expires after two years, it boosts available revenue in the budget to support investments that help expand opportunity in communities across Virginia.
• Extended the refundable Earned Income Tax Credit (EITC) through 2030. After years of advocacy, Virginia made a refundable EITC option in 2022, implementing a 2019 recommendation from The Commission to Study Racial Inequity in Virginia Law. Making the credit refundable allows eligible families to claim the entire credit, even if they owe little to no state income tax. Because Black and Latino people are more likely to be pushed into low-paid work, this policy helps to boost income and offset state and local sales and use taxes that take up a greater portion of their income. While earlier budget proposals would have made the current, more generous policy permanent, the final budget extends it through 2030 — still guaranteeing this critical support for a few more years.
• Increased the standard deduction. While this helps many families, it provides little to no benefit for families who already have low taxable incomes. In previous budgets, lawmakers paired state standard deduction increases with improvements to the EITC, making sure that people who needed economic support the most were included. These changes together were shown to improve tax fairness. In future years, lawmakers should continue to pair standard deduction increases with improvements to the refundable EITC so that tax changes better reflect families’ ability to pay and advance racial equity. 

Advancing racial equity requires both a fair tax code and sustained public investment. The compromise budget took some steps forward, but making the refundable EITC permanent and asking those with the greatest resources to contribute their fair share would help build a stronger commonwealth for everyone.

Labor and Wage

When people have the resources to thrive, not just survive, our economy does better, too. For too long, Virginia policymakers kept wages low and limited help for families struggling to make ends meet. These low-road policies were rooted in anti-Black racism and continue to keep people who are Black, immigrants, and women from getting by and getting ahead. It doesn’t have to be this way.

This year, the compromise budget:

• Invested in higher wages for home care workers. The legislature included $44.3 million in state funding, matched by $49.6 million in federal funds, to provide an 8.1% raise for agency- and consumer-directed personal care, respite, and companion services workers effective January 1, 2028. While part of the investment is required to keep consumer-directed workers from falling below Virginia’s scheduled $15 minimum wage, lawmakers extended the same raise to Northern Virginia workers already paid above $15 and to agency-directed home care workers. Half of Virginia’s home care workers are Black, and two-thirds are workers of color, making this an important investment in racial equity.
• Accelerated those raises. Governor Spanberger proposed a budget amendment, which the legislature accepted, to begin home care worker raises a year earlier. The amendment uses $51.1 million in state funds, matched by $57.2 million in federal funds, to provide a 4% raise on January 1, 2027, and a 3.9% raise on top of that on January 1, 2028. Workers will receive nearly the same raise as originally proposed, but benefit sooner.
• Strengthened labor law enforcement. The budget includes an additional $10.1 million — up from just $2.3 million a year — to better enforce labor laws, such as prevailing and minimum wage, as well as the new paid sick leave and heat stress protections. It also requires the Secretary of Labor to report by September 15, 2026, on an enforcement strategy and any additional resource needs. Women, people of color, and immigrant workers are more likely to experience wage theft and benefit from stronger enforcement.
• Funded raises tied to minimum wage increases. The budget includes $3.3 million for raises for state employees and state-supported local workers affected by Virginia’s scheduled move to a $15 minimum wage on January 1, 2028, with an interim increase to $13.75 on January 1, 2027. While we don’t have demographic information on state employees who will benefit, more than half of all workers in Virginia who will benefit from the higher minimum wage are workers of color.

Beyond the budget:

• Governor vetoed collective bargaining legislation. The budget’s investments in workers do not offset the governor’s disappointing veto of legislation that would have removed Virginia’s ban on collective bargaining by state employees and standardized collective bargaining rights for local and school board employees. Collective bargaining gives working people a stronger voice on the job while establishing fair and transparent workplace standards. These standards help reduce barriers that have historically disadvantaged Black and Latino workers and women of all races, while improving wages and working conditions across Virginia. Future budgets should include the funding needed to set up best-practice collective bargaining structures, including establishing a Public Employee Relations Board.

Looking ahead, Virginia should continue to build an economy where everyone has the opportunity to thrive through living wages and stronger workplace protections. These policies can expand opportunities for working people of color, strengthen families, and build a stronger commonwealth.

Education

Early childhood care and education

Access to high-quality early education helps children arrive at school ready to learn while allowing parents to work knowing their children are safe and supported. Research shows the benefits are lasting, contributing to stronger educational outcomes, better health, and higher earnings throughout life. Yet Virginia provides childcare assistance to only a fraction of eligible families with low to moderate incomes. Because Black parents are often paid less due to employment discrimination and differences in inherited wealth, limiting access to child care particularly harms Black children and families.

After major progress in 2024, policymakers did not provide significant new funding for Virginia’s child care system this year. As a result, low provider reimbursement rates, low early childhood teacher pay, and too few Child Care Subsidy Program slots will continue to limit access for families.

Looking forward, policymakers should provide significant new investments in child care – backed by significant new revenue as needed – so parents can work knowing their children are in high-quality, stable childcare and preparing to reach their full potential in school. 

K-12

Every child in Virginia deserves access to a high-quality public education. Yet generations of discriminatory policies and underinvestment mean many Black children are more likely to attend schools with fewer resources than students in wealthier communities. State lawmakers can play a critical role in reducing barriers to a high-quality education by delivering more school funding to communities that don’t have the resources to do more on their own and targeting funding to programs that improve school climate and learning for students facing the highest barriers. 

After several years of significant progress in delivering additional resources for students from low-income families, English language learners, and other students facing higher barriers to learning, this year policymakers made smaller improvements in the adequacy and fairness of funding for Virginia students.

The compromise budget passed by legislators and signed by the governor in June:

• Increased funding for students from low-income families. Lawmakers provided an additional $28.9 million to boost funding for school divisions with the highest shares of students from low-income families by increasing the maximum available “at-risk add-on” to 37.85%. Because longstanding discrimination has contributed to lower wages, less generational wealth, and fewer opportunities to move to higher-income communities for Black families, the “at-risk add-on” funding particularly helps school divisions where a high share of students are Black. This year’s increase provided an average of $129 more per student for the 26 school divisions where more than 37.5% of students are Black. However, the increase is smaller than either the House or Senate originally proposed.
• Continued support for restorative practices. The budget included funding for guidance and evaluation from the State Department of Education on evidence-based restorative practices. Currently, Virginia school administrators are more likely to use exclusionary discipline against Black students and students with disabilities. Numerous studies have found that restorative practices can lead to significant reductions in serious student offenses and exclusionary discipline measures.
• Invested in planning for community schools. The budget provides an additional $5 million for development and implementation planning grants for community schools, a model that has been shown to strengthen student outcomes through holistically addressing student and family needs. Community schools that enhance community engagement and necessary supports for students have been shown to particularly boost outcomes for Black students, English language learners, and students from socio-economically disadvantaged families. 
• Missed an opportunity for English learners. The compromise budget did not boost funding for students who are learning English, 91% of whom are identified as students of color. 

As policymakers on Virginia’s Joint Subcommittee to study Elementary and Secondary Funding consider a full rehaul of Virginia’s school funding formula, making significant and ongoing improvements to the equity and adequacy of Virginia’s school funding will be critical to making sure every Virginia student has the opportunity to attend an excellent public school.

Higher education

Higher education should be within reach for every student, regardless of their race, income, or where they live. Yet rising tuition continues to make college less affordable for many families. And Virginia is still not meeting its commitment to cover two-thirds of the cost of undergraduate education for in-state students, leaving students and families to shoulder a greater share of the cost. Students who already face barriers due to their race or economic status are particularly harmed by these rising costs.

Lawmakers made some investments in the latest budget decision:

• Directed a study of international student enrollment. The budget directs the State Council of Higher Education for Virginia (SCHEV) to study declining international student enrollment at Virginia’s four-year colleges and universities before the 2027 legislative session. This decline reflects a broader national trend following new and prohibitive travel ban and visa policies from the Trump Administration.
• Strengthened support for some Virginia HBCU’s. The budget includes support for HBCUs in Virginia, including $500k for non-religious education at Virginia University of Lynchburg as well as an additional $25 million each for Norfolk State University and Virginia State University to support an ongoing collaboration with private HBCUs in Virginia. The collaboration includes a pilot program for workforce credentials, including in the healthcare field, where Black Virginians are underrepresented in many licensed professions. 
• Maintained support for Hispanic-serving institutions. The budget maintains Tuition Assistance Grant (TAG) funding for Hispanic-serving institutions not included in Governor Youngkin’s introduced budget. 
• Increased undergraduate financial aid. The budget provides an additional $50 million to support undergraduate need-based financial aid across our public colleges and universities, including VSU and NSU, helping make higher education more accessible to lower-income students across the state.

Building on these investments can help make sure every student, regardless of their race, income, or background, has an opportunity to pursue higher education.elp make sure every student, regardless of their race, income, or background, has an opportunity to pursue higher education.

Decriminalization of Poverty 

For far too long, Virginia’s criminal legal system has placed heavier burdens on Black communities through incarceration, court debt, barriers to voting rights, and unequal access to legal representation. Black Virginians are incarcerated at nearly four times the rate of white Virginians and make up nearly half of people denied voting rights due to felony convictions, despite being less than 20% of the voting age population. 

Lawmakers took steps this year to remedy this harm. The budget for the next two years: 

• Funded automatic marijuana sentence reviews. The budget funds automatic hearings for people still incarcerated for felony marijuana convictions for conduct that Virginia has since legalized. Courts must reduce or vacate those sentences unless prosecutors show a public safety reason not to. 
• Prepared for automatic restoration of voting rights. If voters approve a constitutional amendment this November, the budget includes funding to automatically restore voting rights when people leave incarceration, ending the petition process that has kept too many Virginians, particularly Black people, from fully participating in our democracy. 

• Reduced barriers created by court debt. Black Virginians are assessed 33% of all court fines and fees despite being about 18% of the population. The budget funds legislation that allows people to apply their wages earned from incarcerated work toward their court debt at the community service rate, with retroactive application to July 2023. It also funds technology upgrades for a new law that will reduce the statute of limitations on court debt to 10 years and delays the collections start date on debt to 180 days. 
• Continued momentum on fines and fees reform. The budget establishes a workgroup to study how court fines and fees are assessed and collected statewide. This information will help build the foundation for future reform. 
• Strengthened legal representation and reentry. The budget invests in the successful earned sentence credit reform to count time served before sentencing and adds 45 new support staff positions in public defender offices.
• Expanded community-based violence prevention. The budget expanded the Safer Communities Program, and added $2 million for targeted grants supporting programs like Big H.O.M.I.E.S and C.U.T.S that reach communities facing high levels of gun violence.  

These investments reflect years of work by impacted community members, advocates, and legislators who helped to make these investments happen. Virginia should continue building on this progress by investing in policies that help people move forward and strengthen communities.

Health Care 

Access to affordable health care helps people stay healthy, care for their families, and participate fully in their communities. Medicaid plays a particularly important role for Black Virginians, who make up 34% of people enrolled in Medicaid, despite making up about 18% of Virginia’s population. Recent federal policy choices have already priced more than 100,000 people in Virginia out of health insurance through the marketplace, and new federal Medicaid requirements are expected to take coverage away from an additional 260,000 people. 

These changes will put even more pressure on health care providers and families across the commonwealth. While Virginia cannot fully make up for harmful federal actions, lawmakers took steps to reduce their impact on communities most affected. 

The budget for the next two years:

• Funded implementation of new Medicaid requirements and outreach and education support. The budget includes $134 million for the systems needed to implement new work reporting and increased eligibility check requirements, plus $3.5 million for outreach, education, and workforce support. These investments will help eligible Virginians keep their coverage by reducing barriers to understanding and completing new requirements, such as having limited English proficiency. Additionally, lawmakers created a $350 million Medicaid Reserve Fund and a $225 million Federal Uncertainty Contingency Fund, anticipating further federal cuts. 
• Restored FAMIS prenatal coverage. Lawmakers made an important choice to restore funding ($29.5 million) that former Governor Youngkin cut in his outgoing budget, preserving coverage for care before, during, and for 60 days after giving birth for certain immigrant communities. The program served more than 11,300 pregnant people in 2025 alone and helps more families have a healthy start. 
• Increased support for safety net facilities. Lawmakers invested $10 million for free clinics and $5 million for Federally Qualified Health Centers (FQHCs) to help prepare for growing demand as more people in Virginia are priced out of health coverage or kicked off Medicaid. These providers are often a primary source of care for people without adequate insurance, people with low incomes, and many rural communities. Because Black people in Virginia are more likely to be affected by new Medicaid requirements, these investments are especially important for protecting access to care in Black communities. 
• Helped offset higher ACA Marketplace premiums. After Congress allowed enhanced Affordable Care Act (ACA) premium tax credits to expire at the end of 2025, many people buying coverage through Virginia’s Marketplace saw premiums increase by an average of 75%, pricing more than 100,000 people out of health insurance. The budget provides $150 million in one-time funding to lower 2027 premiums for people who make between 138% and 250% of the federal poverty level (about $37,701 to $68,300 for a family of three). 
• Improved access to sickle cell care. The budget invests $11.3 million to expand access to treatment and increase education and awareness about sickle cell disease. Sickle cell disease primarily affects Black communities, and too many patients have had their pain dismissed or undertreated when seeking care. This investment can improve access to quality care and increase awareness of a condition that has too often been overlooked.

Recent federal policy changes forced Virginia to devote much of its new health care funding to protecting existing coverage and access to care, leaving fewer opportunities to make new investments. By raising sustainable, long-term revenue, lawmakers can both protect families from federal choices and make new investments that expand access to quality, affordable care.

Social Services

Every family in Virginia should be able to meet their basic needs and build a safe and secure future. Investments in social services can reduce hardship, expand opportunity, and help families thrive, especially those who have faced longstanding barriers to economic security.

Unfortunately, lawmakers did little to increase investment in this area in the most recent budget:

• Missed an opportunity to strengthen TANF. Cash assistance helps families pay for essentials like groceries, diapers, and utilities during challenging times. Despite rising costs, the budget did not increase Temporary Assistance for Needy Families (TANF) cash assistance benefits, leaving many families without the support they need to keep up.
• Provided some support for immigrant and refugee families. The budget provides $100,000 for the Sacred Heart Center, a Richmond nonprofit that offers education programs and legal services to immigrant and refugee families in South Richmond and North Chesterfield. The funding will help Sacred Heart connect people with the tools to thrive and flourish.
• Backfilled federal cuts to SNAP. Families of color are more likely to receive SNAP benefits. Due to federal cuts that shifted benefit and administrative costs to states, lawmakers included some funding to help cover those costs and support people now facing work reporting requirements. This comes as 100,000 fewer Virginians are enrolled in SNAP than in the previous year and food banks are facing increasing demand.

Looking ahead, Virginia can strengthen economic opportunity by continuing to invest in programs that help families meet their basic needs, no matter where they live or where they were born.

Housing

Every person in Virginia deserves a safe, stable, and affordable place to call home. Across Virginia, Black communities have built neighborhoods, local businesses, and community institutions that strengthen the commonwealth. Yet generations of discriminatory housing policies have made it harder for many Black families to afford a home. Public investment in affordable housing can build on community strengths by helping more families stay rooted in the communities they help build while expanding opportunity for future generations. 

The two-year budget passed by lawmakers and signed by the governor:

• Expanded affordable housing. Lawmakers increased funding for the Virginia Housing Trust Fund to help create and preserve affordable homes and launched a pilot program to help fund mixed-income housing developments, increasing the supply of homes for people with a range of incomes. 
• Helped prevent evictions. The budget provides an additional $11.5 million for the state’s Eviction Reduction Program to help prevent housing instability before families lose their homes.
• Strengthened homelessness services. The budget increases funding for rapid rehousing programs, regional and localized organizations that coordinate housing and homelessness services (Continuum of Care lead agencies), and transitional housing and life-skills facilities.

While these investments represent meaningful progress, Virginia’s housing affordability crisis is far from resolved. Less than 1% of the budget’s General Fund spending, over which lawmakers have the most flexibility, went toward affordable housing. Housing advocates have called on lawmakers to expand state funding for housing programs, grants, and tax credits in future years, so more Virginians can afford a place to live and build stronger communities.

Environmental Justice

People in Virginia deserve clean air, safe drinking water, and healthy communities. Protecting them requires investments that reduce pollution, strengthen infrastructure, prepare communities for climate-related challenges like flooding and drought, and address the impacts of rapid data center development. These investments can also advance racial equity by addressing the environmental burdens created by decades of policy choices, which have overwhelmingly harmed many communities of color and lower-income communities.

Virginia’s recent budget makes several important investments:

• Strengthened water quality and oversight. The budget provides $57.2 million for drinking water infrastructure, PFAS monitoring, groundwater studies, and establishes oversight related to data center development. 
• Invested in wastewater infrastructure. It also includes a $189 million deposit to the state’s Water Quality improvement fund for eligible wastewater improvement projects, as well as $50 million to Richmond for its combined sewer overflow project in addition to funding for other wastewater projects.
• Moved Virginia toward rejoining RGGI. The budget directs the state to rejoin the Regional Greenhouse Gas Initiative (RGGI), which limits carbon emissions from power plants while generating revenue for state investments. Before Governor Youngkin illegally withdrew Virginia from the program in 2023, RGGI generated more than $800 million for flood resilience and energy-efficiency improvements that help lower utility and power costs for families. 
• Environmental Monitoring. The budget makes a $100 million appropriation to a fund to study and improve environmental monitoring efforts across the state, which will help to protect our shared resources and community health.

Looking ahead, sustained environmental investments can help make sure every community has cleaner air, safer water, and greater resilience against future challenges.

Preserving History and Expanding Representation

People in Virginia deserve to see their histories, cultures, and contributions reflected in the commonwealth’s historic places, museums, and public spaces. Public investments help preserve those stories so they remain part of how Virginia understands its past and shapes its future.

In the most recent budget, lawmakers:

• Helped preserve historically significant places. The budget provides $2 million to the BIPOC Historic Preservation Fund to preserve historic sites connected to Black, Indigenous, and other historically underrepresented communities.
• Expanded inclusive tourism outreach. The budget funds a media campaign to attract visitors from Black, Indigenous, and Hispanic communities.
• Recognized overlooked innovators and leaders. The budget provides funding for the Museum of Black Women Innovators, helping share the stories of Black women whose achievements are often ignored.

Together, these investments help make sure more of Virginia’s history is preserved, shared, and recognized.

Categories:
Budget & Revenue, Decriminalizing Poverty, Economic Opportunity, Education, Health Care, Immigration