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New Virginia budget includes the restoration of sales tax holiday and a one-time taxpayer rebate

Posted at 3:09 PM, Sep 14, 2023

RICHMOND, Va. -- Virginia Gov. Glenn Youngkin signed a bipartisan state budget Thursday that provides $1 billion in tax relief and boosts spending on public education and mental health by hundreds of millions of dollars.

The compromise spending plan was overwhelmingly adopted last week by Virginia's politically divided General Assembly after intense negotiations that extended into a special session.

The Republican governor made no amendments to the budget before signing it outside the Capitol, where every Assembly seat is up for election this fall. When Youngkin descended the building's steps in Richmond, lawmakers clapped and speakers blared Bachman-Turner Overdrive's “Takin' Care of Business."

“I want to thank all of the members of the General Assembly for coming together and showing that when we work together, we can move mountains,” Youngkin said.

Virginians “waited a long time for this day — too long, candidly,” the governor added. "But we came together. We got it done. And we know we work for you.”

The budget's $1 billion in tax reductions are mostly through one-time tax rebates of $200 for individuals and $400 for joint filers. The budget also raises the standard deduction, removes the age requirement for a military retiree tax benefit and reinstates a popular back-to-school sales tax holiday that lawmakers forgot to renew. While the holiday typically takes place in August, it will be held this year in late October.

Tax policy changes were a key part of what turned into a six-month stalemate, as Youngkin and the GOP-controlled House of Delegates had argued for an additional $1 billion permanent cuts, including a reduction in the corporate tax rate. Democrats who control the state Senate argued that more reductions would be premature after negotiating $4 billion in tax relief last year. The rebates, which weren’t initially included in either chamber’s budget bill, were a compromise.

The budget also boosts K-12 education spending by about $650 million and funds behavioral health initiatives sought by Youngkin, including new crisis receiving centers and crisis stabilization units.

The spending plan includes funding for an extra 2% raise for state workers starting in December, and money for the state’s share of a 2% raise for state-supported local employees, including teachers. The combination of tax cuts and increased spending is possible because the state had accumulated a multibillion surplus.

Among other notable provisions are: $200 million in new resources for economic development-related site acquisitions; $62.5 million in additional funding for college financial aid; and $12.3 million for the Virginia Employment Commission to help address the unemployment appeals backlog and support call centers.

It allocates $250,000 to establish a Department of Corrections ombudsman within the state’s watchdog agency — something long sought by reform advocates.

The budget directs the State Corporation Commission to continue a widely supported reinsurance program that reduced premiums this year. The commission recently warned that because lawmakers hadn’t acted to effectively renew the program, it was headed for suspension in 2024.

Because Virginia operates on a two-year budget cycle, with the full plan adopted in even years and tweaked in odd years, this year’s delay has not impacted state government services or payroll. But it led to consternation from school districts, local governments and other interests impacted by the state’s taxation and spending policies.

Members of both parties praised the budget in a news release put out by Youngkin's office.

“We added almost two-thirds of a billion dollars to schools as they are working to help students who have suffered from learning loss regain achievement,” said said Sen. George Barker, a Fairfax County Democrat who co-chairs the Senate Finance and Appropriations Committee.

Del. Barry Knight, a Virginia Beach Republican who chairs the House Appropriations Committee, said: “Most importantly, we did all of this while also giving back hard-earned tax dollars to Virginia’s families.”

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