by Dick Hall-Sizemore

The members of the General Assembly money committees have something in common with President Trump. They, like him, love “one big beautiful bill.”

OK, admittedly, that is a little exaggerated. However, those committees have reported out budget bills loaded with non-budget-related items. “Legislating through the budget” is somewhat of a pejorative term used to describe the inclusion of policy items in the budget bill. However, that term needs some context.

At its core, the budget bill is a policy document. It does more than appropriate money. It includes language instructing agencies on how that money is to be spent. Although this language is not included in the Code of Virginia, it is law. Sometimes, the language is lengthy, detailed, and specific. One infamous section dealing with the Department of Medical Assistance Services (Medicaid) consumes more than 30 pages of the budget bill.

In addition to language that places conditions on appropriations, there are two other categories of legislation in the budget. The first is language overriding current sections of the Code. The key phrase is “Notwithstanding the provisions of Section XXXX.” One can find instances of this type of provision throughout the budget bill. (Disclosure: While working as an analyst with the Department of Planning and Budget, I had a hand in developing some of these overrides, some of which remain in the budget bill.)

The other category of legislation in the budget are the add-ons at the end of the budget bill, in which existing Code sections are amended and brand-new Code sections are set out. These are separate enactment clauses to the bill that includes the budget. If the bill is enacted, the provisions in those enactment clauses are included in the Code of Virginia, whereas the budget bill is not included in the Code and expires after two years.

For many years, governors and legislative majorities of both parties have been making use of these overrides and add-on provisions. The primary reason for doing so is either to hide provisions in the budget bill that might not otherwise get passed or to hitch potentially unpopular legislation to the budget bill, which is must-pass legislation.

Of course, these provisions are not “hidden” in the literal sense. They are plainly set out in the budget bill. If it is a mid-biennial bill introduced in the short session, the language is in italics. However, if the provision is in the biennial budget bill introduced in the long session, all language is technically new, although the vast bulk of it is identical to the language in the last biennial bill, and any language added is not shown any differently. Changes to the Code of Virginia are set out in separate enactments and can easily be found by those aware of the practice of tacking these provisions onto the end of the budget bill. However, provisions in the body of the bill, such as Code overrides, are more difficult to find or know about. The Department of Planning and Budget notifies the General Assembly money committee staff of such additional language when the bill is introduced and it may be noted in the Governor’s budget document, but, unless one is paying particular attention to a certain area of the budget bill, it goes unnoticed by the general public.

The most common subject matter of these separate enactments is taxation. In one sense, it makes sense to include changes in taxation policy in the budget bill. After all, the function of the budget bill is to direct how revenues brought in by the state should be used. To develop the budget bill, legislators need to know how much revenue is projected to come in during the biennium. By including the taxation provisions in the budget bill, members of the House and Senate money committees have more control over the passage of those taxation provisions and, thus, can include the revenue projections, increases or decreases, in their budget provisions. If the tax provisions were not in the budget bill, but in separate legislation, the money committee members could not be certain of their passage and thus could not responsibly include those revenue projections in their budget provisions. They would have to wait a year until the next session.

Provisions unrelated to the budget make up the remaining type of separate enactments. It was in this area that Democrats on the money committees outdid themselves this year. (To be fair, the Republicans on the committees did not lodge public objections.) Here is a list of “legislating in the budget”:

House of Delegates

Taxation —Rejects Governor’s tax provisions and substituted “House Tax Relief Package.” Extends the pass-through entity elective tax until January 1, 2027. Additionally, it increases the standard deduction for tax year 2025 and 2026 to $8,750 for single filers and $17,500 for joint filers, and increases the refundability of the earned income tax credit from 15.0 to 20.0 percent of the federal earned income tax credit.

Taxation overrides—Extends by one year the sales tax exemption on certain drilling equipment. Also, extends from 2035 to 2050 the sales tax exemption for data centers. (Note: “Part 3: Miscellaneous” of the budget bill and Appropriation Act contains numerous long-standing provisions overriding Code provisions.)

Gaming Commission—Consolidates regulation of legalized gambling, except for the Virginia Lottery, in a new Virginia Gaming Commission. In his state of the Commonwealth address, Governor Youngkin had called for the establishment of such an agency. Del. Paul Krizek (D-Fairfax) introduced a bill (HB 2498) to establish such a commission. It died in the Appropriations Committee.

Pari-mutuel betting—Changes the distribution of pari-mutuel revenues.

Out-of-state college students—Authorizes Norfolk State University, Virginia State University, University of Virginia-Wise, and any institution of higher education in which out-of-state students constitute less than 20 percent of the student population to charge out-of-state students at the in-state tuition level.

Senate

Taxation—Rejects the Governor’s tax provisions. Among other provisions, increases the standard deduction for tax year 2025 and 2026 to $8,750 for single filers and $17,500 for joint filers.

Skill games—Under the title of “Virginia Small Business Economic Development Act,” authorizes the placement of “skill games” in retail establishments to be regulated by the Virginia Lottery Board. Del. Michael Feggans (D-Virginia Beach) introduced legislation (HB 2747) that would have legalized the use of electronic games whose outcomes “are determined predominately by either chance or by the skill of the player”, but it died in a House General Laws subcommittee.)

Local school construction—Authorizes any city or county to increase its local sales tax by one cent, subject to approval in referendum, with the additional revenue dedicated to local school construction. This provision was passed in last year’s GA session as separate legislation, but vetoed by Governor Youngkin.

Historical horse racing—Would prohibit the location of any facility featuring wagering on historical horse races unless approved in a referendum conducted on or after July 1, 2018. This provision is aimed at Rosie’s Emporium, which is in the process of establishing a historical horse racing emporium in Henrico County, as allowed under current law. Sen. Schuyler VanValkenburg has similar legislation (SB 1223). That bill was left in the Senate Finance and Appropriations Committee. The budget amendment is more stringent than the bill. Whereas the bill would have allowed Rosie’s Emporium to continue with its plans but significantly reduce any revenue the company could have realized, the budget provision would stop it altogether until it could get approval via referendum. For further background and discussion of this issue, see here.

Legislative standing—Provides legal standing to the Speaker of the House of Delegates and the President Pro Tem of the Senate to intervene in any legal proceeding involving the application of the Virginia Constitution or law. The provision would prohibit the Attorney General from settling a case without the approval of the legislative intervenors. Furthermore, it authorizes legislative leaders to sue the Governor in the event that he or she does not disburse funds as appropriated by the legislature or implement any enactment of the General Assembly.

PTSD—Amends the Code to increase the maximum duration after the date of diagnosis that Worker’s Compensation benefits are payable for PTSD sustained by first responders.

Data center sales tax exemption—Requires data center operators to meet certain energy efficiency standards in order to be eligible for the sales and use tax exemption for data center purchases. There have been several bills proposed to accomplish this purpose—HB 116 and SB 192 that were carried over from the 2024 Session and SB 1196, introduced by Sen. Creigh Deeds (D-Albemarle), all of which were allowed to die in committee. The Senate preferred to deal with this topic in the budget.

College and Career Ready—The 2024 General Assembly established the College and Career Ready Virginia Program, to be become “effective beginning with course registrations for the fall term of the 2025 academic year.” The provision in the current Senate version of the budget bill would delay this effective date by one year.

Housing Opportunity—Extends the Housing Opportunity Tax Credit, due to expire on Dec. 31, 2025 to Dec. 31, 2030.