VACo Analysis of Governor’s Introduced Budget

On December 20, Governor Youngkin presented his budget proposals for the upcoming 2024-2026 biennium, as well as amendments to the current biennium budget in the “caboose” budget bill.  The Governor described his proposal as the “Unleashing Opportunity” budget, making a case that tax reform and investments in business recruitment and workforce readiness are necessary to enable Virginia to compete with peer states for job and population growth.

Tax restructuring is a major component of the Governor’s proposal, which would include (1) reducing individual income tax rates in each tax bracket by an average of 12 percent; (2) increasing the statewide sales tax rate by 0.9 percentage point; (3) capturing certain digital products and services, such as digital downloads, website hosting and design, and streaming music and video, in the sales tax base; and (4) expanding the Earned Income Tax Credit to 25 percent of the federal credit.

Of particular interest to local governments, the Governor challenged the legislature to work to eliminate the car tax and suggested that the lost revenue could be replaced with an increase in the local sales tax.  A specific proposal is not included in the budget submission, and the Governor gestured toward the complexity of finding an appropriate replacement in describing permanent elimination of the car tax as “a complicated, yet worthy aspiration” that will require collaboration among state and local leaders.  Following the release of the Governor’s budget, VACo participated in a meeting with representatives of the Administration and several state agencies to discuss gathering data on current collections from the car tax.

The Governor also outlined proposed investments in job creation, pointing to his recommended funding for Virginia Business Ready Sites; workforce development; development of a biotechnology, life sciences, and pharmaceutical manufacturing innovation network to create a “research triangle” in Virginia; and support for child care to ensure continued access after the expiration of federal funds.  Other priority areas include investments in behavioral health and water quality.

Revenues

The Governor’s budget assumes a mild recession beginning in the fourth quarter of FY 2024 and lasting through the second quarter of FY 2025.  The budget forecasts a general fund revenue decline in FY 2024 of 0.6 percent (an upward revision from the earlier projection of a 5.5 percent decline), and general fund revenue growth of 1.4 percent in FY 2025 and 5.4 percent in FY 2026 (these figures include tax policy changes incorporated in the Governor’s budget).  The budget also includes a transfer to the General Fund from the Revenue Reserve Fund of amounts above the statutory cap.  Virginia Code limits combined deposits to the Revenue Stabilization Fund and Revenue Reserve Fund to 15 percent of the average of the prior three years’ annual income and sales tax revenues; a provision in the last biennium budget has overridden this language and allowed the combined fund balances to reach 20 percent of the prior three years’ average income and sales tax revenues.  Transferring funds in excess of the 15 percent cap would make approximately $805 million over the biennium available for use.

An overview of key items in the budget follows below.

Grocery tax reimbursement

• The Governor’s budget fails to maintain the state’s commitment to replace lost revenue for K-12 associated with elimination of the state’s portion of the sales and use tax on food, which took effect January 1, 2023. Language in the budget proposes to override the statutory requirement to provide an amount equal to the revenue that would have been distributed for this purpose had the state portion of the “grocery tax” not been eliminated.  This action runs contrary to the understanding at the time the state portion of the grocery tax was eliminated that the revenue replacement would be ongoing – an understanding incorporated into statute.  When questioned by Senate Finance Co-Chairman George Barker about this proposal, DPB Director Michael Maul indicated that the Administration’s expectation is that the additional revenue generated by the expansion of the sales tax will make up for the elimination of this funding.

Compensation

• Provides the state’s share of a 1 percent bonus payment for funded SOQ instructional and support positions ($53 million), effective July 1, 2024; these funds require a local match based on the LCI. Also provides the state’s share of a 2 percent salary increase, effective July 1, 2025, for funded SOQ instructional and support positions ($122.8 million).  The state’s share would be prorated for school divisions that provide less than an average 2 percent salary increase, but a school division must provide at least an average 1 percent salary increase in FY 2026 to access the funds.
• Provides for a 1 percent bonus payment for state employees and state-supported local employees on December 1, 2024. Provides for a 1 percent salary increase for state and state-supported local employees on July 1, 2025.  Provides for another 1 percent bonus payment for state and state-supported local employees on December 1, 2025.

K-12

• Does not propose items recommended in the recent JLARC report on public education funding.
• Includes $160.6 million over the biennium for rebenchmarking of the Standards of Quality.
• Recognizes an additional $23.9 million in FY 2025 and $61.8 million in FY 2026 in additional sales tax revenues associated with the proposed expansion of the sales tax base to capture certain services and digital personal property.
• Provides $40 million over the biennium for the new Diploma Plus program, which would provide grants to high school students to support attainment of high-demand industry-recognized credentials.
• Deposits $115 million in General Funds and $235 million from the Literary Fund in FY 2025 to the VRS teacher retirement plan to address unfunded liabilities. Uses $150 million per year from the Literary Fund (rather than the General Fund) for school employee retirement contributions.
• Provides $61.2 million over the biennium for the state share of one reading specialist position per 550 students in grades 4-5 and one reading specialist position per 1,100 students in grades 6-8, in accordance with legislation passed in 2023.
• Appropriates $80 million per year from casino gambling proceeds deposited into the School Construction Fund for the School Construction Assistance Program.
• Directs the Secretary of Education to convene a stakeholder workgroup to make recommendations on the regional, comparative, and differentiated pay analysis identified in the Competitive Teacher Pay Report from 2023, and the implementation of a teacher compensation model that includes student outcomes and meets recommendations identified in the 2023 report.
• Provides $25 million in FY 2025 and $15 million in FY 2026 for a new statewide assessment system ($10 million of the first year spending is one-time funding for transition costs).
• Provides $200,000 per year to establish the position of Chief School Mental Health Officer.
• Deposits $30 million per year to the College Partnership Laboratory Schools Fund.
• Provides $800,000 per year in Lottery funds to Accomack County and Northampton County school divisions for teacher recruitment and retention efforts.
• Incorporates a series of technical adjustments in FY 2024 in the caboose budget, as follows:
  • Updates Average Daily Membership projections (reduction of $58.7 million)
  • Updates categorical programs (increase of $919,155)
  • Updates distributions for school age population (reduction of $14,725)
  • Updates enrollment data for English as a Second language (reduction of $4 million)
  • Updates fall membership data for Direct Aid programs (reduction of approximately $800,000)
  • Captures an increase in Lottery proceeds of $89.5 million
  • Adjusts participation projections for Lottery-funded programs (reduction of $18.6 million)
  • Updates costs for Remedial Summer School (reduction of $2.7 million)
  • Updates sales tax revenues (reduction of $71.4 million)
  • Updates support for National Board Certified Teacher bonuses (reduction of approximately $600,000)
• Incorporates a series of technical adjustments in the caboose and biennium budgets, as captured in the following table:

Office of Emergency Medical Services

• Exempts the Office of Emergency Medical Services from making an otherwise required transfer of $12.5 million to the General Fund in FY 2024 or FY 2025. This action is intended to address a shortfall in funding for local EMS needs.

Early Childhood

• Directs $39 million from the American Rescue Plan Act State and Local Fiscal Recovery Fund to the Child Care Subsidy Program in FY 2024.
• Directs $174 million from the general fund in FY 2025 and $237.8 million from the general fund in FY 2026 to support the Child Care Subsidy Program, of which $1 million in FY 2025 is to be used to establish and administer early learning and child care accounts hosted on a digital wallet platform. Of this funding, approximately $53 million in FY 2025 and $53.7 million in FY 2026 reflect dollars redirected from the Virginia Preschool Initiative and Early Childhood Expansion programs as a result of projected nonparticipation, as well as eliminating the current cap on the Local Composite Index (LCI) for these programs.  Current budget language caps the LCI for Virginia Preschool Initiative at 0.5; removing the cap would mean that the local share would increase for localities with LCIs above 0.5.
• Language extends the Superintendent of Public Instruction’s authority to alter staff-to-child ratios and group sizes for licensed child day centers and child day centers that participate in the Child Care Subsidy Program flexibility until June 30, 2026.
• Redirects $26.8 million per year from the Virginia Preschool Initiative and Early Childhood Expansion program to the Virginia Early Childhood Foundation for the Mixed Delivery initiative to support public-private delivery of early learning services for children from birth-age five. Imposes certain additional requirements for local plans, including attendance requirements, parental workforce activity requirements that align with requirements for the Child Care Subsidy Program, and parental copays.  A report is due by July 1, 2025, on the efficacy of the initiative and a proposed conclusion to the program and transition of children into other offerings.
• Retains language exempting community providers from teacher licensure requirements when paid within the confines of the Virginia Preschool Initiative’s community add-on partnerships, as long as the provider meets the expectations of the statewide measurement and improvement system.
• Provides $25 million in FY 2025 for an early learning capital incentives fund, which will be administered by the Department of Housing and Community Development in partnership with the State Council of Higher Education for Virginia and the Department of Education, with the objective of increasing the supply of quality early learning spaces in childcare and early learning deserts. Local government and public higher education institution grantees will be selected through a competitive process that prioritizes increasing capacity in areas of greatest need, submitting business models that are sustainable without state operating subsidies after the first or second year, repurposing and/or retrofitting underutilized facilities, and engaging business and local employers directly.
• Includes language stipulating that the Governor is authorized to transfer any previously authorized ARPA SLFRF project which has unobligated funds on June 30, 2024, to supplement Child Care Subsidy Program funding.

Administration – Elections

• Provides $148,991 GF in FY 2025 and $161,397 GF in FY 2026 to fund a position for voter list maintenance.

Administration – Constitutional officers and jails

• Moves $9.4 million in projected vacancy savings in FY 2025 to a reserve fund to be used in FY 2026 to reimburse expenses incurred within established budgets for Constitutional officers if vacancy levels are reduced and vacant positions are filled.
• Captures $15 million per year (in FY 2024, FY 2025, and FY 2026) in per diem payment savings based on inmate population reductions and projected growth in jail populations over the next biennium.
• Directs $500,000 in FY 2025 from the Commonwealth Opioid Abatement and Remediation Fund to establish jail-based substance use disorder treatment programs in local and regional jails.
• Provides $159,889 per year to adjust the salaries of Constitutional officers whose localities met a population-based threshold.
• Does not include additional funding to address staffing standards or to restore funding for unfunded or underfunded positions resulting from prior budget reductions.

Agriculture and Forestry

• Reduces deposits to the Farmland Preservation Fund by $437,500 per year, for a remaining deposit of $437,500 per year.
• Provides an additional $2 million in FY 2025 for the Agriculture and Forestry Industries Development Fund.
• Includes $250,000 in FY 2025 for the Blue Catfish Processing, Flash Freezing, and Infrastructure Grant Program, which continues funding levels from FY 2024 that were included in Chapter 1 (the budget revisions enacted in September 2023).
• Provides $500,000 in FY 2025 and $250,000 in FY 2026 for the Dairy Producer Margin Coverage Premium Assistance Fund (this is a reduction from the FY 2024 level of $700,000).
• Provides $266,130 per year from the General Fund, along with matching non-general funds, for inspectors at slaughter and meat processing facilities.
• Provides $2 million in FY 2025 for a competitive grant program for agricultural technology research projects to advance the agricultural industry, assist the development of agricultural products, and improve infrastructure growth, productivity, or efficiency.
• Does not include any additional appropriation to the Forest Sustainability Fund, which was established in 2022 to assist localities that forgo revenue by adopting use value assessment and taxation for real estate devoted to forest use.

Commerce and Trade – Broadband

• Reduces the appropriation for the Virginia Telecommunication Initiative by $29.7 million in FY 2025 and by $49.7 million in FY 2026, leaving an appropriation of $20 million in FY 2025. DPB Director Maul indicated that the large infusion of federal funding for broadband in recent years made additional state appropriations unnecessary at this time.

Economic Development/workforce

• Deposits $25 million in FY 2025 to the Virginia Business Ready Sites Acquisition Fund (Chapter 1 included $75 million in FY 2024).
• Deposits $150 million in FY 2025 and $50 million in FY 2026 to the Virginia Business Ready Sites Program Fund (Chapter 1 included $179.5 million in FY 2024).
• Provides $10 million in FY 2025 for the development of an inland port in the Mount Rogers Planning District (Chapter 1 provided $10 million in FY 2024).
• Provides $100 million GF in FY 2025 for the Virginia Biotechnology, Life Sciences, and Pharmaceutical Manufacturing Network; requires the Virginia Innovation Partnership Authority to establish a Network Advisory Board to review and recommend approval of investments.
• Deposits $75 million per year to the Virginia Housing Trust Fund (representing level funding from FY 2024).
• Captures $28 million in GO Virginia balances in FY 2025.
• Reduces funding for the Enterprise Zone Grant Fund by $1.5 million per year to reflect declining utilization; eliminates language allowing the installation of solar panels to be considered eligible investments for the purposes of the real property improvement grants under certain circumstances.
• Provides an additional $4 million GF in FY 2025 for the Virginia Removal or Rehabilitation of Derelict Structures Fund to support industrial site revitalization.
• Provides an additional $350,000 per year for the Center for Rural Virginia, which would be renamed the Senator Frank Ruff Center for Rural Virginia.
• Provides $250,000 per year in supplemental funding for the Lenowisco Planning District Commission and the Cumberland Plateau Planning District Commission (reduced from $500,000 in FY 2024); designates the funding for operations of the Coalfield Expressway Authority.
• Deposits $6 million in FY 2025 to the Virginia Power Innovation Fund (an increase of $2 million from FY 2024 funding levels).
• Provides an additional $1.25 million in FY 2025 and $1.5 million in FY 2026 for the Virginia Office of Education Economics.
• Provides $2 million in FY 2025 and $2.25 million in FY 2026 to the Virginia Economic Development Partnership to launch an innovative framework for economic growth. 
• Increases funding for the New Economy Workforce Credential Grant Program by approximately $4 million in FY 2025 and $5.3 million in FY 2026.
• Provides an additional $19 million in FY 2025 and $1 million in FY 2026 to the State Council of Higher Education for Virginia for the Innovative Internship Program (these funds include funding for internships previously budgeted under the Central Appropriations category, which provided $10 million in FY 2024). The funding is designed to expand paid or credit-bearing student internship and other work-based learning opportunities in collaboration with Virginia employers.
• Provides $3.9 million per year to the Virginia Community College System to establish nine regionally focused career placement offices.
• Provides $15 million in FY 2025 to the Virginia Economic Development Partnership to create a comprehensive, multi-faceted marketing program to raise awareness of in-demand job opportunities and career pathways, promote training and certification programs, encourage college students and military personnel to stay in Virginia, and recruit out-of-state workers to move to Virginia.

Human Services – Aging/Adults with Disabilities

• Reflects an increase in the auxiliary grant rate to $2079 per month (up from $2055), beginning January 1, 2024.
• Provides $246,548 per year to address an increase in adult protective services hotline calls.
• Provides an additional $37,423 per year in support for Centers for Independent Living (CILs); includes language directing the Department of Aging and Rehabilitative Services to collect data on the total operating budget of each CIL and how each CIL uses state dollars.

Human Services – Children’s Services Act

• Includes $36.4 million in the FY 2024 “caboose” budget for the state’s portion of spending for projected growth in services provided through the Children’s Services Act, as well as $97 million over the biennium for this purpose.
• Provides $1.2 million per year for the anticipated costs of services provided to children served through kinship care and parental agreements.

Human Services – Behavioral Health

• Proposes a series of investments in the Governor’s Right Help, Right Now behavioral health initiative, including:
  • Funding for an additional 1,720 developmental disability waiver slots in the Medicaid program in each year of the biennium.
  • $35.6 million over the biennium for additional crisis receiving centers or crisis stabilization units, enhancements to existing sites, and pharmacy improvements.
  • $20.8 million over the biennium for salary increases for clinical staff and $15.8 million over the biennium for salary increases for food and environmental services staff at state hospitals.
  • $10 million in FY 2025 for comprehensive psychiatric emergency programs or similar models of care in emergency departments.
  • $10 million in additional funding over the biennium for the Virginia Behavioral Health Loan Repayment Program; expands eligibility to psychiatric registered nurses; increases maximum award amount for “Tier 1” professionals (child and adolescent psychiatrists; psychiatric nurse practitioners; psychiatric registered nurses; psychiatrists) from $30,000 to $50,000 per year. Sets aside $1 million per year for eligible recipients who are school-based.
  • $10 million in FY 2025 for one-time costs of establishing additional mobile crisis services in underserved areas.
  • $9.5 million in additional funding for the alternative transportation and custody programs to expand the programs to serve individuals under involuntary commitment orders. Combines funding for alternative transportation and alternative custody.
  • $7.2 million per year for the Department of Education to contract with a telehealth provider for mental health care services for students in grades 6-12; local school divisions that participate must develop a process for parents to opt-in to these services.
  • $3 million per year to support student mental health services at institutions of higher education.
• Funds 20 additional psychiatric residency slots ($1 million per year in general funds, with matching federal funds).
• Continues funding for the school-based mental health pilot program (included in Chapter 1, the budget revisions enacted in September 2023) at $15 million per year (up from $7.5 million in FY 2024 in Chapter 1); earmarks $500,000 in FY 2025 for a statewide evaluation of school-based mental health services, with a report due June 1, 2025.
• Provides $575,000 per year to contract with the Virginia Health Care Foundation to support the costs of supervisory hours needed for licensure for individuals seeking advanced degrees in social work or counseling.
• Provides $595,876 in FY 2025 and $645,876 in FY 2026 for mental health workforce initiatives, including an evaluation of the licensing process, funding a workforce training director, and providing scholarships for behavioral health technicians.
• Provides $1 million per year to establish and maintain a credentialing database for youth mental health services; the database is to include a public-facing online registry to identify and verify providers and practices and include information to assist local school divisions in receiving reimbursement for services provided in school-based settings.
• Provides $2.6 million per year for the expansion of de-escalation training by the Virginia Crisis Intervention Team Coalition.
• Provides $300,000 in FY 2025 to update training modules for preadmission screening clinicians.
• Provides $3.6 million in FY 2025 and $4.2 million in FY 2026 for crisis co-responder programs to support Marcus Alert implementation.
• Broadens the use of funds previously provided for dementia behavioral specialists to be used for geriatric behavioral specialists; also includes provisions in the caboose and biennium budgets to broaden language associated with pilot programs for individuals with dementia who may otherwise be admitted to a state facility to allow this funding to be used for geriatric individuals.
• Broadens language providing funding for certain substance use disorder treatment regimens that was previously limited to drug courts to apply to specialty dockets.
• From the previously appropriated $7.5 million per year for alternative inpatient options or increased community capacity for patients on the Extraordinary Barriers to Discharge List, allows $5 million to be used for forensic patients who are admitted to, or at risk of admission to, state hospitals; allows $1.5 million of the $7.5 million to support the discharge of private hospital patients at risk of transfer to state hospitals.
• Dedicates $24.3 million in bond proceeds for safety renovations at Eastern State Hospital and provides $35 million from the general fund for various renovations at state hospitals.
• Provides $741,989 in FY 2025 and $711,989 in FY 2026 for partnerships between academic institutions and state hospitals to serve as clinical training sites.
• Provides $715,301 in FY 2025 for workforce development at state hospitals, and $70,514 in FY 2025 for the same purpose at the state training centers and $20,813 in FY 2025 at the Virginia Center for Behavioral Rehabilitation.
• Provides an additional $2.6 million for Part C Early Intervention.
• Provides $3.4 million in FY 2025 and $3.3 million in FY 2026 for peer wellness stay programs, which are voluntary, short term, overnight, peer run, recovery supports housing for individuals in distress that are sometimes referred to as “hospital diversion programs” and serve as an alternative to inpatient hospitalization.
• Provides $750,000 GF in FY 2025 and $1.5 million GF in FY 2026 for specialty dockets.

Human Services – Health

• Provides $4 million per year from the General Fund for the Earn to Learn nursing program (this program was supported with ARPA State and Local Fiscal Recovery Fund dollars in Chapter 1).
• Provides an additional $936,000 per year for the Nursing Scholarships and Loan Repayment Program.
• Includes $6.4 million per year to continue actions in Chapter 1 to appropriate state matching funds for the Drinking Water State Revolving Fund from the Infrastructure Investment and Jobs Act.

Human Services – Medicaid

• Modifies appropriation to the Virginia Health Care Fund (which is used as part of the state match for Medicaid) to reflect an additional $508.9 million needed from the General Fund to offset declines in non-general fund sources. Funds the Medicaid forecast ($714 million over the biennium).
• Authorizes the Department of Medical Assistance Services (DMAS) to modify Medicaid behavioral health services such that legacy services for youth are replaced with the implementation of tiered community-based services for youth and families appropriate for delivery in homes and schools and legacy services for adults are replaced with a comprehensive array of psychiatric rehabilitative services for adults with serious mental illness. All new and modified services are to be evidence-based and trauma-informed.  New services are to be implemented by June 30, 2026.
• Provides $516,602 in FY 2025 and $676,502 from the General Fund in FY 2026 (with associated federal funding) to authorize and fund reprocurement of the Cardinal Care managed care contract.
• Authorizes DMAS to seek federal authorization to implement telehealth service delivery options for certain services offered through Developmental Disability waivers.
• Authorizes DMAS to seek federal authorization to make certain administrative changes to improve access to peer recovery services.

Human Services – Social Services

• Provides $2.9 million in FY 2025 and $2.5 million in FY 2026 from the General Fund (with matching non-general fund amounts) for administration of the new summer Electronic Benefits Transfer program for children.
• Funds foster care and adoption cost of living adjustments ($3.5 million GF per year, with matching non-general funds).
• Provides $72,215 from the General Fund in FY 2025 and $104,660 in non-general funds in FY 2025 for background checks for employees of local departments of social services and contractors and employment candidates so that the Department can use the federal Income Eligibility Verification System to determine TANF eligibility.
• Provides $8.1 million GF in FY 2025 and $7.8 million GF in FY 2026 to sustain relative maintenance payments at current rates, fund kinship and alternative living supports, and provide $250 bonus payments to local departments of social services for certain kinship foster care placements.
• Provides $1.5 million in FY 2025 and $2.5 million in FY 2026 to develop and implement educational programming, coaching, and support services for fathers, and to create a public awareness campaign to promote responsible and involved fatherhood.
• Makes several adjustments to reflect concerns about structural balance in the state’s Temporary Assistance to Needy Families block grant:
  • Replaces $4 million in TANF dollars with a like amount from the general fund for long-acting reversable contraceptives in FY 2026.
  • Replaces $2.4 million per year in TANF dollars for Families Forward with a like amount from the general fund.
  • Replaces $1 million per year in TANF dollars for Resource Mothers with a like amount from the general fund.
  • Eliminates funding in FY 2026 for the Two-Generation/Whole Family pilot project provided through Community Action Agencies ($1.1 million).
  • Replaces $600,000 per year in TANF support for Early Impact Virginia with a like amount of General Fund support.
  • Replaces $9 million from TANF for Community Employment and Training programs with a like amount of General Fund support in FY 2026.
  • In the caboose and biennium budgets, removes TANF support for Family Restoration Services in Hampton ($125,000), Portsmouth Volunteers for the Homeless ($250,000), and Menchville House ($125,000).

Human Services – Substance Use Disorder

• Allocates $5.5 million per year from the Commonwealth Opioid Abatement and Remediation Fund to the Department of Health for the purchase and distribution of opioid reversal agents and test kits and for tracking software.
• Allocates $400,000 in FY 2025 from the Commonwealth Opioid Abatement and Remediation Fund to the Department of Health for a one-year demonstration project for wastewater surveillance for fentanyl and norfentanyl in up to three geographically diverse localities.
• Allocates $4 million per year from the Commonwealth Opioid Abatement and Remediation Fund to the Department of Behavioral Health and Developmental Services for a marketing campaign and classroom-based programmatic efforts to address the opioid crisis.
• Allocates $1 million per year from the Electronic Nicotine Delivery Systems Fund (from settlement related to claims regarding marketing of these products toward youth) to the Department of Behavioral Health and Developmental Services to support a youth vaping prevention campaign.
• Provides $1.1 million in FY 2025 and $210,000 in FY 2026 for high-intensity inpatient services for youth and adolescents with serious mental illness or substance use disorder who may otherwise require inpatient hospitalization.
• Provides $400,000 in FY 2026 for clinical support to the Chesterfield Recovery Academy.

Labor

• Transfers funding and positions to establish the new Department of Workforce Development and Advancement, which was created in legislation enacted in 2023.
• Provides $2 million per year to establish a registered apprenticeship grant program to increase the number of apprentices in the Commonwealth; grants are capped at $2000 per apprentice and will be disbursed after an apprentice has been part of an employer’s apprentice program for a minimum of six months.
• Provides $1 million in FY 2025 to launch the Healthcare Workforce Training System program to connect job seekers in southeastern Virginia to healthcare skills training and supportive services.
• Authorizes a line of credit for the Virginia Employment Commission for operational costs in times of significant increases in unemployment.

Natural and Historic Resources

• Includes language providing an exception to the requirement to reserve 15 percent of any amounts appropriated to the Water Quality Improvement Fund from General Fund revenue surpluses if the cash balance in the reserve is at or above $100 million.
• Deposits $138.1 million in FY 2025 into the Water Quality Improvement Fund for agricultural best management practices and nonpoint source pollution programs.
• Deposits $100 million in FY 2025 into the Virginia Community Flood Preparedness Fund.
• Deposits $25 million in FY 2025 into the Resilient Virginia Revolving Loan Fund.
• Increases appropriation to the Dam Safety, Flood Prevention and Protection Assistance Fund by $5 million in FY 2025.
• Provides $4.4 million in FY 2025 and $4.1 million in FY 2026 for Chesapeake Bay monitoring and assessment.
• Provides $400,000 per year for contracted technical evaluation modeling services for groundwater permit issuance and renewal.
• Provides $675,000 per year for the air permitting program.
• Provides $50 million in FY 2025 for the City of Richmond’s Combined Sewer Overflow project.
• Provides $35 million in FY 2025 for the City of Bristol’s landfill remediation, contingent on the execution of a memorandum of understanding between the locality and the Department of Environmental Quality.
• Provides $73.9 million in FY 2025 to the City of Norfolk for its Coastal Storm Risk Management Project; and authorizes a treasury loan of $21 million, contingent upon the City applying casino revenues toward the project.
• Provides $35 million in FY 2025 to establish a competitive grant program to support improvements at significant historic sites in Virginia in anticipation of the country’s Semiquincentennial celebration.
• Includes $1 million in FY 2025 for the Virginia Black, Indigenous, and People of Color Historic Preservation Fund; authorizes use of funds for the preservation of historic sites (not only archaeological sites).
• Includes language in the caboose allowing all municipal separate storm sewer system (MS4) localities to be eligible for $5 million in funding previously appropriated from the Water Quality Improvement Fund to the Department of Environmental Quality.

Public Safety and Courts

• Provides $500,000 per year for Sussex County to offset costs of providing emergency medical transport for inmates at Sussex State Prison.
• Contributes $32,401 for the state’s share of costs for security enhancements at the Franklin County Jail.
• Provides an additional $2.4 million in FY 2025 and $4.8 million in FY 2026 from the general fund for the Virginia Crime Victim-Witness Fund Victim-Witness Grant program to account for declines in federal grant awards and special fund revenues.
• Provides an additional $3.5 million in FY 2026 from the general fund for grants to local sexual assault crisis centers and domestic violence programs, to offset declines in federal grant awards.
• Provides $18 million in FY 2025 as a one-time appropriation to support efforts to fill persistent vacancies in law enforcement agencies. Eligible uses include sign-on bonuses and relocation expenses.  At least $3 million of this funding is to be used to support wellness and mental health initiatives for law enforcement personnel in state and local law enforcement agencies.
• Provides an additional $2 million in FY 2025 for the Department of Criminal Justice Services to make competitive grants to combat hate crimes.
• Provides an additional $200,000 per year for the witness protection program.
• Funds aid to localities with police departments (“HB 599”) at $219.7 million per year; these amounts reflect FY 2024 funding levels once the additional $2.1 million provided in one-time assistance in Chapter 1 is removed.

Transportation

• Includes language to allow the use of GARVEE bonds for the Interstate Operations and Enhancement Program.
• Provides $350,000 in nongeneral funds in FY 2025 to study airport infrastructure needs and the implementation of emerging technologies.
• Includes language allowing total Virginia operating assistance to the Washington Metropolitan Area Transit Authority (WMATA) for FY 2025 to increase from the total operating assistance provided the previous year by an amount determined to be appropriate by the Director of the Department of Rail and Public Transportation, subject to WMATA meeting certain requirements for preparation of a corrective action plan. Does not include additional state support for WMATA to address expected budget shortfalls.
• Directs the Commonwealth Transportation Board to provide at least $200 million to the Transportation Partnership Opportunity Fund (TPOF) from Commonwealth Transportation Fund revenues in the most recent Six-Year Financial Plan.
• Provides $20 million from the general fund for TPOF in FY 2025.
• Provides $70 million from the general fund in FY 2025 to support the I-81 Northbound Lane Widening Project in the Salem District.

Reserves

• Directs the State Comptroller to transfer amounts in excess of the statutory cap from the Revenue Reserve Fund to the general fund (the cap had been temporarily overridden by budget language); amounts to be transferred are $712 million in FY 2025 and $92 million in FY 2026.

Tax policy changes

• Extends provisions of 2019 legislation increasing Education Improvement Scholarship amounts for certain students and broadening the definition of disability to January 1, 2028 (the 2019 legislation has a sunset date of January 1, 2024). Increases the cap on Education Improvement Scholarships Tax Credits from $25 to $30 million for FY 2025 and beyond.
• Reduces income tax rates in each bracket, effective January 1, 2025 (from 2 percent to 1.75 percent; from 3 percent to 2.65 percent; from 5 percent to 4.4 percent; and from 5.75 percent to 5.1 percent).
• Increases the state sales tax rate from 4.3 to 5.2 percent, directs revenues derived from the increase to the General Fund.
• Captures certain services and digital personal property in the sales tax base, effective January 1, 2025. Earmarks the additional sales tax revenue that would be generated for transportation purposes from this base-broadening action for the Transportation Partnership Opportunity Fund and the I-81 Corridor Improvement Fund.  Eliminates the prohibition on the application of the Communications Sales and Use Tax to digital products.  Directs the Department of Taxation to develop guidelines to implement this expansion of the sales tax base.
• Increases the Earned Income Tax Credit to 25 percent of the federal amount.

Other items

• Provides $20 million in FY 2025 to support the American Revolution 250 Commission.
• In the caboose, creates the Virginia Sports and Entertainment Authority, to consist of six members appointed by the Governor and three appointed by the City of Alexandria; the Authority will be responsible for construction, operational, and financial viability of the facilities that are part of the planned campus (including a sports arena, performance venue, and hotel developments, among others), servicing the bonds issued by the Authority, and ensuring compliance with all terms and conditions of contracts, memoranda of understanding, and other agreements entered into regarding the campus.
• Provides $500,000 in FY 2025 for the Secretary of Finance to evaluate potential economic development incentives to attract sports teams to the state.
• Deposits $150 million in FY 2025 into the Virginia Technology Infrastructure Fund to be used to support the upgrade, replacement, and modernization of critical technology systems across state agencies.

VACo Contacts: VACo Legislative Team