House and Senate Pass Budgets

The House and Senate passed their respective budget proposals yesterday. Each budget proposal will now be reviewed by the other chamber in advance of the two proposals being placed into a committee of conference by February 12 to develop a compromise budget.

The two budgets are aligned on several major items, including tax relief proposals and the lifting of the cap on recognition of support positions in the K-12 funding formula, VACo’s top budget priority this session.

Following is an overview of key elements of the two budgets of importance to local governments. VACo appreciates members’ advocacy for budget requests submitted by VACo and partner organizations and will continue to advocate for local government priorities as the budget process continues.

K-12 Education: Support Cap

• House and Senate: Both budgets provide $222.9 million in FY 2026 to recognize support positions under the school funding formula in accordance with prevailing local practices. The House budget eliminates the cap on recognition of these positions and the Senate budget funds positions at a ratio that corresponds with prevailing local practice, functionally eliminating the cap. (Item 125 #4h and Item 125 #3s)

K-12 Education: Special Education

• House and Senate: Both budgets provide $52.8 million as an add-on to basic aid for students receiving special education. (Item 125 #5h and Item 125 #4s)

K-12 Education: School Capital

• House and Senate: Both budgets remove the proposed transfer of $150 million from the Literary Fund to the School Construction Fund in FY 2025. The House budget provides an additional $10 million in FY 2026 from expected casino revenues. (Item 125 #9h and Item 125 #10s)
• House: Increases the amount of Literary Fund dollars designated for teacher retirement by $50 million per year (freeing up a like amount of General Fund dollars). (Item 125 #10h)
• Senate: Embeds legislation allowing all cities and counties the ability to impose a 1 percent sales tax for school capital at local option, after approval via referendum. (Item 4-14 #3s)

K-12 Education: School-Based Mental Health

• House: Revises language regarding the existing $15 million per year provided for school- based health clinics. The introduced budget proposes to allow funds to be used to provide technical assistance to school divisions seeking guidance on integrating mental health services and grants to school divisions to contract for community-based mental health services from public or private community-based providers. The House budget strikes this language and instead allows funds to be used for school districts to contract with a mental telehealth provider; no direct costs may be passed onto the patient and all uninsured patients must be covered at no cost. (Item 295 #5h)
• Senate: The Senate budget also removes the proposed additional language from the introduced budget regarding use of the funds and instead adds mobile clinics as an allowable use of funds. (Item 296 #1s)

K-12: Additional Items

• House and Senate: Both budgets eliminate the $50 million proposed in the introduced budget in FY 2025 for infrastructure, technical training, and evidence-based supports for schools identified as needing intensive support or “off-track” under the Board of Education’s School Performance and Support Framework. (Item 120 #1h and Item 120 #1s)
• House and Senate: Both budgets eliminate the $250,000 in FY 2025 and $1 million in FY 2026 proposed for regional support specialists to assist divisions with multiple schools identified as “off track” and needing intensive support. The House budget directs the Department of Education to maintain at least 30 full-time employees in the Office of School Quality to support schools and school divisions not meeting state benchmarks, of which at least six are to be deployed as regional support specialists focused on academic improvement in math, literacy, and science. (Item 120 #2h and Item 120 #2s)
• House and Senate: Both budgets eliminate the $50 million proposed in the introduced budget for the Virginia Opportunity Scholarship Program, which would provide grant awards for qualified students to support certain expenses of attending an accredited private school in the Commonwealth. (Item 125 #1h and Item 125 #1s)
• House and Senate: Both budgets eliminate the proposed deposit of $25 million in FY 2025 to the College Partnership Laboratory School Fund for the design, launch, and operation of college partnership laboratory schools established by a Historically Black College or University in Virginia. (Item 125 #3h and Item 125 #2s)
• Senate: Establishes a workgroup to make recommendations to the Joint Subcommittee on Elementary and Secondary Education Funding regarding updates to the Standards of Quality funding formula. The workgroup would consist of legislators, representatives of localities, school divisions, teachers, families, and education interest groups as selected by the Joint Subcommittee, as well as representatives of the Secretary of Education and the Superintendent of Public Instruction. (Item 1 #1s)
• Senate: Delays the implementation of the revised public school accountability system until the 2026-2027 school year and establishes an advisory committee to review the proposed system. (Item 117 #1s)
• Senate: Funds a mathematics improvement initiative with $12 million in FY 2025 and $1 million in FY 2026; these funds include one-time grant funds for curriculum support and innovative strategies to improve student outcomes in FY 2025 and ongoing funding for regional specialists and a data analyst. (Item 120 #3s)

Compensation: Instructional and Support Positions

• House: Maintains 3 percent salary increase from the 2024 Appropriation Provides $140.5 million for a one-time $1000 bonus payment for state-supported instructional and support positions, with no local match required. The bonus would be provided September 1. Language provided on Sunday would allow school divisions to determine the amount of bonus per employee to maximize the use of the funds to promote retention among instructional and support positions. No local match would be required. (Item 125 #8h)
• Senate: Maintains 3 percent salary increase from the 2024 Appropriation Provides $134.4 million for a one-time $1000 bonus payment for state-supported instructional and support positions, with no local match required. Language provided on Sunday would allow school divisions to determine the amount of bonus per employee to maximize the use of the funds to promote retention among instructional and support positions. The bonus would be provided no later than June 1. (Item 125 #5s)

Compensation and Retirement: State and State-Supported Local Employees

• House: Maintains 3 percent salary increase from the 2024 Appropriation Includes $55.6 million for a 1 percent bonus for state and state-supported local employees, to be included in the December 1 paycheck. (Item 469 #1h)
• Senate Finance and Appropriations: Maintains 3 percent salary increase from the 2024 Appropriation Act. Includes $83.1 million for a 1.5 percent bonus for state and state- supported local employees, to be included in the June 16 paycheck. (Item 469 #1s)
• House: Makes a $100 million lump sum payment to VRS in FY 2025 to reduce the unfunded liability in the state employee retiree health credit program. (Item 469 #2h)
• Senate: Earmarks $500 million from FY 2025 excess revenues, after any Constitutionally- mandated deposit to the Rainy Day Fund, with $250 million to be reserved for the unfunded liabilities of retirement plans administered by VRS and $250 million reserved for the other postemployment benefit plans administered by VRS. (Item 470 #1s)
• Senate: Directs VRS to coordinate with stakeholders, including VACo, to determine whether the elimination of the traditional VRS defined benefit pension has affected the Commonwealth’s and localities’ ability to retain and recruit employees. (Item 484 #1s)

Public Safety – Withholding of Jail Per Diems or HB 599 Funding

• House and Senate: Both budgets strike language in the introduced budget that provides for withholding of HB 599 funding or jail per diem payments from a locality if an official in charge of a jail does not comply with lawful U.S. Immigration and Customs Enforcement (ICE) detainers and does not provide at least 48 hour pre-release notification to ICE, or if an official in charge of a jail or local law enforcement agency or sheriff’s office prohibits or impedes communication or cooperation with ICE pursuant to adoption of a local ordinance, procedure, policy, or custom. (Item 377 #1h and Item 377 #1s)

Public Safety – School Resource Officer Incentive Grants Fund

• House and Senate: Both budgets remove the increase of $6.8 million in FY 2025 proposed in the introduced budget for the School Resource Officer Incentive Grants Fund. The Senate budget includes language designating nongeneral fund balances to be used for digital mapping projects for emergency response and for continuation of previous grants. (Item 394 #1h and Item 394 #4s)

Public Safety – Public Safety Communications Grants

• House and Senate: Both budgets remove the $2.5 million in the introduced budget in FY 2025 for competitive grants to localities for the purchase of public safety radio and communications infrastructure equipment. (Item 394 #2h and Item 394 #2s)

Public Safety – Victim Witness Grant Program

• House and Senate: Both budgets eliminate the additional $200,000 per year proposed for the Victim Witness Grant Program in the introduced budget and the language earmarking at least $500,000 per year for the Office of the Attorney General. (Item 394 #4h and Item 394 #5s)
• Senate: Provides an additional $968,188 in FY 2026 for the Victim Witness Grant Program. (Item 394 #8s)

Public Safety – Sexual Assault and Domestic Violence Agencies

• House: Provides $4.1 million in FY 2026 for local sexual assault and domestic violence agencies to offset reductions in support received through federal Victims of Crime Act funding. (Item 394 #5h)
• Senate: Provides $1 million in FY 2026 for local sexual assault and domestic violence agencies. (Item 394 #7s)

Public Safety – Unmanned Aircraft Replacement

• Senate: Provides $3 million in FY 2025 for a grant program to assist state and local law enforcement and other first responders with replacing unmanned aircraft systems to comply with federal requirements. (Item 394 #10s) The House budget includes $1.2 million in FY 2026 for the Virginia State Police to replace unmanned aircraft. (Item 416 #1h)

Public Safety – Office of First Responder Wellness

• Senate: Removes the additional funding proposed for the Office of First Responder Wellness in the introduced budget ($322,218 in FY 2026) and eliminates the proposed expansion of funds to nonprofit organizations that support first responders (in addition to law enforcement). (Item 394 #3s)

Public Safety – Fire Programs

• Senate: Moves the $5 million proposed in the introduced budget for grants to localities to purchase protective equipment for firefighters from FY 2026 to FY 2025. (Item 406 #1s)
• Senate: Adds language to the provisions of the introduced budget directing the Department of Fire Programs to assess the fees charged by the State Fire Marshal’s office to conduct fire safety inspections and the costs to provide these services to require that this review include a description of which fees, if any, are recommended for an increase based on the market cost and the projected additional fee revenue that would result from such recommended increase. (Item 407 #1s)

Administration: Compensation Board – Constitutional Officers

• House: Provides $5.8 million in FY 2026 to fund 120 paralegal positions for Commonwealth’s Attorneys’ offices; allows the Compensation Board to use the funding for assistant attorney positions and requires distribution of positions in accordance with staffing standards to assist with anticipated workload increases associated with legislation regarding expungement and sealing of criminal records. (Item 64 #1h)
• Senate: Provides $1.6 million in FY 2026 for 68 additional Assistant Commonwealth’s Attorney positions, effective March 1, 2026. Language stipulates that localities shall utilize such funding to supplement, not supplant, local funds provided for salaries of Commonwealth’s Attorneys and their employees. The March 1 start date is intended to align with the effective date of legislation regarding expungement and sealing of criminal records. (Item 64 #1s)
• House and Senate: Both budgets provide $270,970 in FY 2026 to convert the Bath County and Highland County Commonwealth’s Attorneys’ offices to full-time status. (Item 64 #2h and Item 64 #2s)
• House: Provides $5.5 million in FY 2026 for 120 Deputy Clerk IV positions; directs the Compensation Board to distribute one position to each Circuit Court Clerk office to assist with anticipated workload increases associated with legislation regarding expungement and sealing of criminal records. (Item 65 #1h)
• Senate: Provides $1.5 million in FY 2026 for 120 Deputy Clerk IV positions, effective March 1, 2026. Language is intended to require that localities use the funds to supplement and not supplant local funding. The March 1 start date is intended to align with the effective date of legislation regarding expungement and sealing of criminal records. (Item 65 #1s)
• Senate: Removes the proposed $1.4 million included in the introduced budget for a 9.3 percent salary increase for sheriffs’ dispatchers. (Item 60 #1s)
• Senate: Directs the Compensation Board, in consultation with money committee staff and the Department of Planning and Budget, to recommend options for measures to support analysis of salary increases for employees in Constitutional offices. (Item 67 #1s)

Administration: Compensation Board – Jails

• Senate: Directs the Department of Medical Assistance Services to apply for an 1115 waiver from the Centers for Medicare and Medicaid Services to cover certain behavioral health services and medications for individuals incarcerated in state prisons and local and regional jails. VACo has worked with advocacy partners on this issue and supports this amendment. (Item 288 #6s)
• Senate: Directs the Compensation Board to survey local and regional jails to identify the staffing and space impacts of making inmates available to appear in virtual court hearings. (Item 61 #1s)
• House and Senate: Both budgets revise the process by which local and regional jail capital projects are reviewed by the Department of General Services in order to qualify for state reimbursement of up to 25 percent of project costs; this language requires the review process for projects with costs exceeding $12 million. (Item 385 #1h and Item 385 #1s)

Administration: Elections

• House: Earmarks $78,000 from the $500,000 included in the introduced budget for IT needs for the Department of Elections to fund the implementation costs of legislation specifying that the Department must complete any program that systematically removes names of ineligible voters from the voter registration system no later than 90 days prior to a primary or general election. (Item 77 #1h)
• Senate: Reduces funding proposed in the introduced budget for planning for replacement of the Committee Electronic Tracking and Campaign Finance Management systems by $500,000, leaving $250,000 for this (Item 77 #1s)

Agriculture and Forestry

• House and Senate: Both budgets provide $450,000 in FY 2026 for the Large Animal Veterinary Grant Program, to be administered by the State Veterinarian in accordance with legislation being considered this session (the introduced budget provided funding in this amount for a loan repayment program to be administered by the Department of Health). The House budget provides the funds in FY 2026; the Senate includes the funds in FY 2025. (Item 86 #1h and Item 85 #1s)
• House and Senate: Both budgets eliminate the $250,000 proposed in the introduced budget for the Pasture, Rangeland, and Forage Insurance Premium Assistance Fund. (Item 86 #2h and Item 86 #1s)
• House: Provides an additional $250,000 in FY 2026 for the Blue Catfish Processing, Flash Freezing, and Infrastructure Grant Program. (Item 87 #1h)

Commerce and Trade – Business Sites

• House: Moves $20 million in support for the Virginia Business Ready Sites Program Fund from FY 2026 to FY 2025 (leaving total funding of $90 million over the biennium); includes language barring further transfers from the second year of the biennium to the first year. (Item 101 #3h)
• Senate: Adds $20 million in support for the Business Ready Sites Program Fund in FY 2025 and reduces funding by $50 million in FY 2026, leaving total funding of $60 million over the biennium. (Item 101 #4s)
• Senate: Allows the Virginia Economic Development Partnership Authority to determine a site of at least 25 contiguous acres to be an eligible site for the Virginia Business Ready Sites Program Fund, provided that the site is located in a locality with an area of 35 square miles of land or less. (Item 101 #7s)
• House: Provides $15 million in FY 2025 for certain site readiness improvements in Pulaski County. (Item 103 #7h)

Commerce and Trade – Broadband

• House: Includes language stating that it is the intent of the General Assembly that the funding provided for the Virginia Telecommunication Initiative be continued in the next biennium. (Item 103 #2h)

Commerce and Trade – Housing

• House: Restores the down-payment assistance pilot program included in the 2024 Appropriation Act that the introduced budget proposed to eliminate (this program is funded through Regional Greenhouse Gas Initiative balances) and directs the Department of Housing and Community Development to implement the program by May 4, 2025. (Item 102 #1h)
• House: Directs the Department of Housing and Community Development to identify programs designed to keep long-term residents in their primary homes as real property tax liabilities increase. (Item 102 #2h)
• House: Provides $15 million in FY 2026 for grants to first-time homebuyers. (Item 102 #3h)
• House: Restores the pilot program for assistance to tenants and nonprofits to acquire manufactured home parks that was included in the 2024 Appropriation Act and proposed to be eliminated in the introduced budget (this program is funded through Regional Greenhouse Gas Initiative balances). (Item 102 #5h)
• House: Provides $1.5 million in FY 2026 to fund legislation that would provide grants for localities that adopt certain zoning policies to allow for additional housing development. (Item 102 #6h)
• House: Provides $500,000 in FY 2026 for the Virginia Eviction Prevention and Diversion Program. (Item 102 #9h)
• House: Provides $1.35 million in additional support in FY 2026 for Continuum of Care lead agencies. (Item 102 #10h)
• House: Provides $14 million in FY 2025 for grants to localities or planning district commissions that have established, or will establish by December 31, 2025, a local housing trust fund for long-term investments for affordable housing; earmarks $5 million of these funds for Prince William County and $1 million for the City of Emporia. (Item 102 #11h)
• Senate: Funds a rental assistance pilot program with $15 million in FY 2025. (Item 102 #5s)
• Senate: Funds a pilot Workforce Housing Incentive Matching Grant program with $190,000 in FY 2025 for localities to offer incentives for businesses that provide workforce housing assistance. (Item 103 #6s)

Commerce and Trade – Disaster Relief

• House: Redirects the $25 million GF proposed in the introduced budget for a Disaster Assistance Fund to a Hurricane Helene relief program to be administered by the Department of Housing and Community Development; this program would assist residents who lost homes or sustained residential property damage. (Item 102 #12h)
• Senate: Eliminates the proposed Disaster Assistance Fund; instead provides $50 million in FY 2025 for disaster mitigation and Hurricane Helene relief. $25 million would be provided to assist residents who lost homes or sustained residential property damage as a result of Hurricane Helene, and $25 million would be used for major weather event disaster mitigation, such as improving structures’ ability to withstand hazards. (Item 102 #3s)

Commerce and Trade – Community Development and Tourism

• House: Provides $2.6 million in FY 2025 for the Industrial Revitalization Fund. (Item 103 #3h)
• House: Deposits $4.2 million in FY 2025 to the Urban Public-Private Partnership Redevelopment Fund. (Item 103 #4h)
• House and Senate: The House provides $2 million in FY 2026 to capitalize the Electric Vehicle Rural Infrastructure Fund. The Senate provides $1 million in FY 2025 for a grant program to expand electric vehicle infrastructure in rural and underserved localities. (Item 109 #2h and Item 109 #3s)
• House and Senate: The House funds the proposed Solar Interconnection Grant Program with $2 million in FY The Senate proposes $2.5 million in FY 2026 to be allocated by the Virginia Energy Facility Review Board to planning district commissions to create regional energy plans and provide technical assistance to localities related to siting of critical infrastructure projects, in accordance with legislation under consideration prior to crossover. (Item 109 #3h and Item 109 #1s)
• Senate: Deposits $5 million to the Community Development Financial Institutions Fund in FY 2025. (Item 103 #1s)
• House: Increases proposed Virginia Sports Tourism Incentive Program by $3 million, which would be earmarked for an event in Prince William County. (Item 114 #1h)
• Senate: Removes proposed $5 million included in the introduced budget for a Virginia Sports Incentive Grant Program. (Item 114 #1s)
• House: Provides $2.5 million in FY 2026 for the Virginia Tourism Authority to develop a marketing campaign to attract out of state visitors from Black, Indigenous, and Hispanic communities. (Item 114 #4h)

Child Care/Early Childhood

• House and Senate: Both budgets provide $25 million in FY 2025 to support an early childhood employer cost-share pilot program that would increase the supply of high- quality early childhood care and education services by providing matching funds for employer contributions. (Item 125.10 #1h and Item 125.10 #3s)
• House and Senate: Both budgets reverse the action in the introduced budget to eliminate the existing 0.5000 cap on the Local Composite Index for the Virginia Preschool Initiative. These amendments would preserve the existing cap. (Item 125.10 #4h and Item 125.10 #1s)
• House: Reduces the maximum copayment proposed in the introduced budget for FY 2026 Child Care Subsidy and Mixed Delivery slots from 7 percent of household income to 5 percent; allows school age enrollments in the Child Care Subsidy Program to continue; and directs the Early Childhood Care and Education Commission to review several issues, including future approaches to addressing school age child care needs, and recognition of regional variations in cost of living to determine eligibility for subsidized early childhood slots. (Item 125.10 #5h)
• Senate: Removes the proposed pause on school-aged children’s enrollment in the Child Care Subsidy Program proposed in the introduced budget and revises language regarding the proposed workgroup on school-aged care options; directs changes to the methods of reporting waitlists; makes the changes to the attendance requirements proposed in the introduced budget subject to review by the Early Childhood Care and Education Commission. (Item 125.10 #5s, Item 125.10 #6s, and Item 125.10 #4s)
• House: Repurposes $3 million in unused FY 2025 Virginia Preschool Initiative slots to reduce the Child Care Subsidy waitlist by 318 slots. (Item 125.10 #6h) The Senate budget also reflects these savings. (Item 125.10 #2s)
• House and Senate: Both budgets eliminate the $15 million proposed in the introduced budget for an early learning capital supply building fund. (Item 103 #1h and Item 103 #3s)

Workforce development

• House and Senate: Both budgets eliminate the proposed $15 million in the introduced budget for the College and Career Ready Virginia program. The House budget distributes balances in the G3 program that would have been used for the College and Career Ready Virginia program to the New Economy Workforce Credential Grant Program and several other initiatives. The Senate budget delays the College and Career Ready Virginia Program until fall 2026 and directs the State Council of Higher Education for Virginia and the Virginia Community College System to provide a report on dual enrollment. (Item 201 #2h, Item 201 #1s, Item 4-14 #8s)
• House and Senate: Both budgets capture the $2.1 million in FY 2025 proposed in the introduced budget for the “Virginia Has Jobs” initiative (a new workforce portal designed to connect potential applicants with available employment and training opportunities). (Item 354 #1h and Item 354 #1s)
• Senate: Provides $15 million in FY 2025 and redirects $3.5 million in FY 2026 for the New Economy Workforce Credential grant program; restricts high school student participation in the program except for certain circumstances. (Item 130 #2s)

Aid to Local Public Libraries

• Senate: Provides an additional $632,142 in FY 2026 in state aid to local libraries. (Item 227 #1s)

HHR – Children’s Services Act

• House: Removes the language in the introduced budget that would cap state reimbursement to localities for private day special education services. Directs reporting on the transition of students from private placements back to local school divisions. (Item 268 #1h and Item 269 #1h)
• Senate: Retains the proposed cap on state reimbursement; reflects $9.9 million in state savings in FY 2026 associated with the cap. (Item 268 #1s)

HHR – Health

• Senate: Bars the Board of Health from modifying the geographic or designated service areas of regional emergency medical services councils without consulting relevant stakeholders and requires annual reporting on any planned changes to regional council boundaries. (Item 272 #1s)
• Senate: Requires the Office of Emergency Medical Services to transfer $1.4 million annually from the Trauma Center Fund to Chesterfield County for med-flight operations. (Item 272 #2s)
• Senate: Eliminates the proposed $1 million in the introduced budget for community health workers and doulas at local health districts. (Item 278 #1s)
• Senate: Provides $25 million in FY 2025 for one-time grants to localities to upgrade or replace drinking water infrastructure. Requires priority to be given to Greene County and the Town of Bowling Green in administering grant awards. (Item 280 #1s)
• Senate: Requires the Virginia Department of Health to report on progress made in implementing recommendations from the Department of Planning and Budget and JLARC and provides $300,000 in FY 2026 to hire two internal audit positions. (Item 283 #1s)
• House: Provides $1 million in FY 2026 for a pilot program to provide non-emergency medical transportation services for certain uninsured Virginians. (Item 279 #5h)

HHR – Behavioral Health – Crisis Services, Temporary Detention Orders, and State  Hospitals

• House: Reduces funding for reimbursements to local law enforcement agencies for time spent transporting individuals subject to an emergency custody or temporary detention order proposed in the introduced budget by $1.5 million (leaving $2 million for this purpose). (Item 394 #3h)
• Senate: Moves the $3.5 million proposed in the introduced budget for reimbursement for time spent transporting individuals subject to an emergency custody or temporary detention order from FY 2026 to FY 2025. Removes language in the introduced budget that directed prioritization of funds for law enforcement agencies within certain Virginia State Police regions. (Item 394 #1s)
• House: Reduces the $35.2 million proposed in the introduced budget for contracts with private hospitals or other qualified agencies to hire Special Conservators of the Peace to maintain custody of individuals under emergency custody orders or temporary detention orders by $30.2 million in FY 2026. (Item 296 #1h)
• Senate: Reduces proposed funding for private hospitals to hire Special Conservators of the Peace by $31.1 million in FY 2026; directs prioritization of this funding to certain regions. (Item 296 #5s)
• House: Funds six additional Marcus Alert teams ($3.6 million in FY 2026). (Item 297 #2h)
• Senate: Provides $7.8 million for additional co-response programs; explanatory information indicates that this funding is intended to support co-response programs in localities that have not yet received funding for Marcus Alert programs or that are not required to implement all components of the Marcus Alert system. (Item 297 #1s)
• House: Increases support for pilot programs for individuals with dementia or geriatric individuals who may otherwise be admitted to state hospitals by $2 million in FY 2026. (Item 296 #5h)
• House: Directs the Department of Behavioral Health and Developmental Services to form a workgroup to review and recommend a location for a replacement for Northern Virginia Mental Health Institute. (Item C-24 #1h)
• House: Provides $3 million in FY 2025 to convert 10 beds at Southeastern Virginia Training Center to a skilled nursing level of care to enable transfer of residents at Hiram Davis Medical Center in anticipation of its planned closing. (Item C-24.10 #1h)
• Senate: Directs DBHDS to develop an analysis for the development of skilled nursing beds at Southeastern Virginia Training Center to care for the patients at Hiram W. Davis Medical Center or in other facilities operated by DBHDS in need of that level of care. Also directs DBHDS to develop cost estimates for the renovation and improvement of Department- owned facilities to transfer operations from Hiram Davis Medical Center to another Department facility. (Item 301 #1s and Item C-51 #1s)
• Senate: Eliminates the proposed $52.1 million in renovations, repairs, and upgrades to state hospital facilities included in the introduced budget. Provides $10 million in FY 2025 for renovations and repairs to Southwestern Virginia Mental Health Institute. (Item C-24 #1s and Item C-24.10 #1s)

HHR – Support for Community Services Boards

• Senate: Requires that additional state funding for CSBs not be used to supplant existing local contributions. Prevents DBHDS from granting a waiver for the local match requirement for CSBs unless the locality can demonstrate hardship in terms of reduced employment, per capita income, or property values. (Item 297 #3s)
• House: Provides $1.5 million in FY 2026 to reimburse CSBs for evaluations and restoration of competency services. (Item 296 #2h)
• House: Provides $8.7 million in FY 2026 for CSBs to hire additional support coordinators to implement additional Medicaid waiver slots provided over the biennium. (Item 297 #1h)
• House: Provides $8 million in FY 2026 for CSB prevention (Item 297 #3h)

HHR – Additional Behavioral Health Items

• Senate: Provides $115,846 in FY 2026 to fund the provisions of legislation dealing with the regulation of recovery residences that has passed the Senate. (Item 295 #1s)
• Senate: Directs DBHDS to align recovery support services, including services offered by recovery residences, and other similar providers, with the nationally recognized American Society of Addiction Medicine criteria to ensure quality and consistency in care. (Item 295 #3s)
• Senate: Requires DBHDS to take certain steps to promote usage of permanent supportive housing in discharging individuals from state hospitals. (Item 297 #2s)

HHR – Medicaid

• House and Senate: Both budgets authorize DMAS to pursue a Medicaid waiver to allow coverage for neurobehavioral and neurorehabilitation facilities to support individuals with traumatic brain injuries and neurocognitive disorders. The House budget provides funding to serve 20 individuals, and the Senate budget would support 25 individuals. (Item 288 #9h and Item 288 #14s)
• Senate: Directs DMAS to develop a plan for reimbursing community paramedicine services. (Item 292 #6s)
• House and Senate: Both budgets eliminate the Medicaid reserve fund proposed in the introduced budget. The Senate budget directs the Department of Medical Assistance Services (DMAS) to convene a workgroup to develop a process to recognize the true costs of policy changes to the Medicaid program and integrate such a process into budget development. (Item 288 #1h and Item 288 #11s)
• Senate: Requires that, in the event that the increased federal contribution for the Medicaid expansion population is reduced, the Joint Subcommittee for Health and Human Resources Oversight will make recommendations within 30 days of the initial notice of federal action on the fiscal impact of the loss of federal funds and options to preserve health care access. (Item 288 #7s)
• Senate: Directs DMAS and the Department of Social Services to develop cost estimates for the recommendations in a recent report on Medicaid eligibility determination and to establish a joint Steering Committee on Medicaid Eligibility. (Item 292 #12s)
• Senate: Establishes a Medicaid Financial Oversight Council to monitor Medicaid expenditures and enrollment growth. Also establishes the Office of Medicaid Financial Oversight as an independent agency and funds with $1.1 million GF and matching NGF in FY 2026. (Item 292 #13s and Item 489.50 #1s)

HHR – Social Services

• House: Provides $425,750 in FY 2026 to expand the existing program at the Department of Social Services to find relative and fictive kin for youth in congregate care or youth who have been in foster care for 12 months or more. (Item 329 #1h)
• Senate: Provides $100,000 in FY 2026 to expand the existing program to find relative and fictive kin for youth in foster care. (Item 329 #1s)
• House: Includes $1.6 million in FY 2026 for the proposed Future in Focus program that would be established under legislation that has passed the House. This program would provide a monthly payment to former foster youth aged 21 to 23. (Item 329 #2h)
• House: Authorizes the State Board of Social Services to promulgate regulations to expand the application window for the Low-Income Home Energy Assistance Program, provided adequate funding is available to extend the application period. Provides $120,000 in FY 2026 for technical support. (Item 330 #1h)
• Senate: Provides $479,665 in FY 2026 to fund legislation that has passed the Senate that would require local departments of social services to develop housing plans for youth aging out of foster care. (Item 324 #2s)
• Senate: Directs the Department of Social Services to develop a process for Virginia localities to enter into memorandums of understanding with localities in surrounding states for kinship care. (Item 329 #2s)
• Senate: Directs the Department of Social Services to assess the feasibility of requiring local departments to apply for certain federal benefits on behalf of children in foster care and to conserve these benefits in an appropriate trust instrument. (Item 329 #3s)

Labor – Workers Compensation

• Senate: Increases from 52 to 104 weeks the maximum duration after the date of diagnosis that workers’ compensation benefits are payable for anxiety disorder, depressive disorder, and post-traumatic stress disorder incurred by law enforcement officers and firefighters acting in the line of duty. (Item 4-14 #6s)

Labor – Collective Bargaining

• House: Includes $3.3 million GF and $9.4 million NGF to fund the state impacts of provisions of legislation that has passed the House that would authorize collective bargaining for public employees. (Item 471 #3h)

Labor – Paid Family and Medical Leave

• House: Authorizes a treasury loan for the Virginia Employment Commission to fund start- up costs associated with the implementation of a paid family and medical leave program, contingent on the enactment of legislation establishing the program. (Item 356 #1h)

Natural and Historic Resources – Water Quality

• House and Senate: Both budgets direct the Secretary of Natural and Historic Resources to convene a workgroup to review the Water Quality Improvement Fund. The House budget language stipulates certain areas of study. (Item 358 #1h and Item 358 #1s)
• House: Provides $50 million in FY 2025 for the Stormwater Local Assistance Fund. (Item 365 #2h)
• Senate: Provides $40 million in FY 2025 for the Stormwater Local Assistance Fund. (Item C-53.80 #1s)
• House: Reverts to utilization of bond proceeds to support $400 million in wastewater treatment plant upgrades over the biennium, rather than using General Funds; provides an additional $31.2 million GF in FY 2025 to meet updated cost requirements. (Item C-53.50 #1h)
• House: Provides $500,000 in FY 2026 for cyanobacteria mitigation and remediation at Lake Anna. (Item 359 #1h)
• Senate: Provides $250,000 in FY 2025 for cyanobacteria mitigation and remediation at Lake Anna. (Item 359 #2s)
• House: Includes $500,000 in FY 2026 for monitoring of harmful algal blooms in the Shenandoah River. (Item 363 #1h)
• Senate: Includes $250,000 in FY 2025 for testing of inland waterways for the presence of harmful algal blooms. (Item 363 #1s)
• House: Removes obsolete language regarding stormwater utility reports to the Auditor of Public Accounts. (Item 365 #1h)
• Senate: Deposits $50 million in FY 2025 to the Virginia Community Flood Preparedness Fund. (Item 359 #1s)
• Senate: Allows 50 percent of any funds previously distributed for agricultural best management practices that cannot be obligated by a soil and water conservation district by June 15 to be reallocated by the Virginia Soil and Water Conservation Board to any soil and water conservation district for conservation practices. (Item 359 #4s)
• Senate: Provides $2.3 million in FY 2025 for groundwater research in the Eastern Groundwater Management Area. (Item 363 #2s)

Transportation

• House: Directs the Department of Motor Vehicles to evaluate the potential impact of the DMV Select Program on participating localities. (Item 426 #1h)
• House and Senate: Both budgets provide $3.3 million in FY 2025 in updated operating support for the Washington Metropolitan Area Transit Authority. (Item 433 #1h)
• House: Directs VDOT to complete a study of the impact of the development of the state’s highway system on African American communities. (Item 437 #1h)
• House: Directs the VDOT Commissioner to coordinate with the Department of Rail and Public Transportation to ensure that public transit buses are exempt from tolling. (Item 441 #1h)
• Senate: Removes authorization for a treasury loan for the Roanoke Regional Airport Commission that was included in the introduced budget. (Item 422 #1s)

Tax policy

• House and Senate: Both budgets eliminate the proposed Car Tax Credit and instead provide income tax rebates of $200 for individual taxpayers and $400 for joint filers. (Item 255 #1h, Item 258 #2h and Item 255 #1s)
• House and Senate: Both budgets extend the expiration date on the standard deduction, refundable earned income tax credit, and the pass-through entity elective tax until January 1, 2027; increase the standard deduction for tax year 2025 and 2026 to $8,750 for single filers and $17,500 for joint filers; and increase the refundability of the earned income tax credit from 15 to 20 percent of the federal earned income tax credit. The Senate budget also eliminates the Joint Subcommittee to Evaluate Tax Preferences. (Item 4-14 #3h, Item 4-14 #1s).
• House: Provides that for the purpose of the local option property tax exemption for the surviving spouses of first responders who die in the line of duty, a surviving spouse may qualify if the deceased law enforcement officer was a member of the U.S. Capitol Police or District of Columbia Police Department who was involved in the police response on January 6, 2021. (Item 3-5.25 #1h)
• House and Senate: Both budgets eliminate the proposed implementation of market-based sourcing for corporate income tax in the introduced budget (Item 4-14 #3h, Item 4-14 #1s). The Senate budget directs the Department of Taxation to assess implementing market-based sourcing, including its administrative feasibility and impact on state tax revenue. (Item 257 #1s)
• Senate: Directs the Department of Taxation to convene a workgroup of tax practitioners to study the treatment of net operating losses in Virginia when compared to other states and make recommendations to simplify such treatment. (Item 257 #2s)
• House: Extends the sunset date for the retail sales and use tax exemption for data center equipment from 2035 to 2050. (Item 3-5.25 #2h)
• Senate: Requires data centers to meet energy efficiency standards to qualify for the retail sales tax exemption for data center equipment. (Item 4-14 #7s)
• Senate: Extends the Housing Opportunity Tax Credit from 2025 until 2030; directs $20 million of the $60 million in credits authorized per calendar year from 2026 through 2030 for qualified projects located in certain geographic areas. (Item 4-14 #9s)

Impacts of federal policy changes on Virginia budget

• House and Senate: Both budgets require the Department of Taxation to provide estimated fiscal impacts of any changes to federal income tax policy within 30 business days of their enactment, and direct the Governor to submit a budget bill within 20 business days of receiving the estimated fiscal impacts if the cumulative projected impact of the federal changes would decrease general fund revenues by more than $100 million in the current or succeeding fiscal year. If these changes occurred after November 1, the Governor would not be required to submit a budget bill within 20 days, but would be required to account for the revenue impacts in the budget submitted under the regular statutory schedule. (Item 4-1.01 #1h and Item 4-1.02 #1s)
• House and Senate: Both budgets stipulate that Virginia will not automatically conform its income tax structure to any federal income tax changes that would increase or decrease state general fund revenues by any amount in the fiscal year in which the amendment was enacted or any of the succeeding four fiscal years, with the exception of amendments to the federal tax code that are subsequently adopted by the General Assembly, or federal income tax “extenders.” This language is a departure from the rolling conformity statute enacted in 2023, which generally provides for conformity with federal changes that affect state revenues up to certain thresholds. (Item 4-14 #3h and Item 4-14 #1s)
• Senate: Requires the Department of Planning and Budget to provide the estimated fiscal impact within 30 business days after the enactment of federal changes that impact federal grant revenue to the Commonwealth by at least $100 million in the current or succeeding fiscal year. If the cumulative projected impact of these changes results in a decrease in grant revenue of more than $100 million in the current or succeeding fiscal year, or if the reduction in revenue results in a cost shift to the Commonwealth of more than $100 million, the Governor must submit a plan detailing the reductions, the impact on services, and the amount that must be offset by state revenues. For additional funding the state is required to expend, the Governor must submit a plan detailing specific offsetting spending reductions. If federal actions result in additional general fund expenditures that exceed one percent of the general fund operating budget in the fiscal year in which the federal changes occur or the succeeding fiscal year, the Governor must notify the Chairs of the Senate Finance and Appropriations and House Appropriations Committees, and the Governor would be barred from withholding any spending authority until the General Assembly enacts a spending reduction plan through a general appropriation act. (Item 4-1.02 #2s)

Gaming

• House: Establishes the Virginia Gaming Commission. (Item 489.50 #1h and Item 4-14 #2h)
• House: Beginning July 1, 2026, directs the entirety of the local historical horse racing revenue share to remain with the localities hosting satellite locations (rather than being split with New Kent County) (Item 4-14 #1h)
• Senate: Bars the Virginia Racing Commission from authorizing a licensee to construct, establish, operate, or own a satellite facility until a referendum is held on or after July 1, 2025, if such locality has not passed a referendum allowing pari-mutuel wagering on or after July 1, 2018, and no pari-mutuel wagering at satellite facilities was authorized by the Commission on or before January 1, 2025. (Item 4-14 #4s)
• Senate: Embeds 2024 legislation legalizing skill games and imposing a tax and regulatory framework on the games. Authorizes a treasury loan for the Virginia Alcoholic Beverage Control Authority to administer oversight until the Lottery Board promulgates necessary regulations. (Item 4-14 #2s, Item 489.10 #2s)

Other items

• House: Directs the establishment of a workgroup to make recommendations to the General Assembly on the potential creation of a commission to oversee water infrastructure installed by the state to support the potable and fire safety needs of three state facilities located in Nottoway County. (Item C-53.60 #1h)
• Senate: Adjusts the scope and title of a water infrastructure project that is providing water for state facilities in Nottoway County. (Item C-53.60 #1s)

VACo Contacts: VACo Legislative Team