Virginia House, Senate budgets conflict on tax cuts

RICHMOND — The Virginia Senate and House of Delegates on Thursday passed competing budget bills, documents that lawmakers will have to meld into a compromise in the coming weeks before a spending plan goes to Gov. Glenn Youngkin.

The two bills outlining amendments to the two-year budget that runs through mid-2024 contain some similarities, including increased mental health funding and money for an extra 2% raise for public employees, in addition to the the 5% increase agreed to last year. But the Democrat-controlled Senate and GOP-controlled House are far apart on whether to enact the additional $1 billion in tax cuts Youngkin seeks.

The House version includes the governor’s call for changes that include a reduction to the corporate tax rate and to the top individual income tax rate, while the Senate’s does not.

“I’ll remind you that we negotiated $4 billion in tax relief when the budget was adopted just a few months ago. To go further at this time would be premature given the inflationary pressures our economy has been experiencing,” Senate Finance and Appropriations Committee co-chair Janet Howell said in a committee meeting outlining that chamber’s bill.

Republican House Appropriations Chairman Barry Knight said Thursday that with a $3.6 billion surplus over the two-year period, the state has plenty of cushion for the additional tax cuts. But the Virginia Beach delegate noted that adopting the House version is just a step toward the next round of negotiations.

“As you are all aware, this is a practice of give and take. ... The final product will be a compromise reflecting the priorities of both the House and the Senate and will benefit the entire state,” Knight said on the House floor.

Virginia operates on a two-year budget schedule, adopting the key framework in even-numbered years and making amendments in odd years.

Each chamber will now take up the other’s plans before the legislation is sent to a conference committee. Negotiators will hash out a compromise that will need to clear both chambers before going to Youngkin, who could also seek amendments.

Here is a look at points of agreement, differences and items of interest in the two chambers’ bills, which both passed Thursday with bipartisan support:

Taxes

Youngkin’s administration and House Republicans said the tax cuts they are seeking — in particular their push to move the corporate tax rate from 6% to 5% — will help lure businesses to Virginia and create jobs.

“This budget document will get Virginia back into the economic recruitment game,” House Majority Leader Terry Kilgore said in a statement.

Democrats say the plan is a giveaway to big businesses at the expense of core government services.

“This amended budget before us is nothing but a gift for corporations and their high-ranking executives,” House Democratic Leader Don Scott said on the floor Thursday. He argued that in seeking the cuts, Youngkin is trying to make a splash for his potential 2024 presidential bid.

Schools

Leaders of both chambers promised schools will be made whole after a state error led them to expect more funding than they were set to receive. The two budgets go about it differently, however.

The Senate budget allocates $58.1 million in general fund money, while the House provides $4.9 million. Knight has also said there’s already enough extra sales tax revenue beyond what was expected to offset the discrepancy.

Both bills would increase spending on direct aid for school districts, but the Senate is proposing a larger sum, which has drawn praise from public school advocates.

The House budget is in line with the governor’s proposal to increase funding by $50 million for his lab schools initiative, a push to partner colleges with K-12 systems that he says will boost innovation. The Senate version would redirect lab school funding to public school districts.