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July 1 has come and gone, we’re in a new fiscal year and Virginia still doesn’t have a budget. Sure, the state does technically have a biennial budget approved by the General Assembly in 2022 that remains in effect, but what to do with billions in surplus funds has yet to be decided.
Gov. Glenn Youngkin and fellow Republicans who hold a majority in the House of Delegates want to spend the money on tax cuts that they wish to make permanent. The Democratic majority in the state Senate would like to spend more on mental health services, higher education and K-12 education.
State lawmakers adjourned the 2023 session in February without having agreed on what to do with the surplus funds. Budget negotiations that resumed last week broke down after two days, with lawmakers at loggerheads on a key issue – whether to make the proposed tax cuts permanent – to, in effect, extend the lower rates to a time when the state might not be so flush with funds.
The reason the state has so much extra cash is because of federal Covid relief funds that have been flowing into the state coffers. With the end of the pandemic, that spigot is being shut off so that the state is going to have to make do with less in future years. It would be best not to spend money the state doesn’t have.
Decisions about tax relief in future years should be left to future sessions when lawmakers will have a better grasp of what their fiscal state is. At the present time, the state seems to have sufficient surplus funds to pay for tax cuts and higher spending on state services. We urge both sides of this debate to reach a compromise on what to do with the cash on hand, but to not compromise the future by committing to permanent tax cuts we might not be able to afford.
The partisan divide that led to the impasse is reflected in the views of the Rockbridge area’s two representatives in the General Assembly – Democratic Sen. Creigh Deeds of the 25th District and Republican Del. Ellen Campbell of the 24th District. These districts and their current configurations remain in effect through the end of the year. After that, redistricting puts Deeds and Campbell in new districts, assuming each prevails in the Nov. 7 general elections.
In a newsletter he sent to his constituents Friday, Deeds, fresh off a victory in a primary election, said Senate Democratic budget negotiators had agreed to one-time tax cuts of $890 million but had rejected the idea of making those tax cuts permanent. He noted that core services of education and mental health have been underfunded for more than 20 years as the state pays for an ill-considered scheme to cut the car tax, a revenue source that localities depend upon.
Campbell, in a newsletter she sent to her constituents, also Friday, said “Senate Democrats killed our legislative package that would have delivered significant tax relief to families and small businesses” but that “our budget negotiators are still hard at work to put more money back into the pockets of Virginians. Unfortunately, efforts to reach an agreement on the budget have been stalled by Senate Democrats who refuse to compromise.”
We believe Senate Democrats are willing to compromise on the tax cut issue, if it’s a one-time occurrence and funding is increased sufficiently for critical services like education and mental health. The question of whether to cut taxes further in future years can be decided at the ballot box this year when all 140 members of the General Assembly will be up for election. How this question is answered will determine which party prevails at the polls and achieves majority status in either, or both, the House of Delegates and state Senate.
In the meantime, we hope that the governor convenes a special session and that legislators from each party give a little ground to reach a budget compromise. Local governments and school divisions need to know what state funding they can expect in this fiscal year so they can plan accordingly.
