By Steve Haner
The fight that is about to occur at the Assembly’s reconvened session on Wednesday is entirely about taxes, not about spending.
An analysis of Governor Glenn Youngkin’s proposed compromise budget – done by the Democrats’ favorite financial bean counters, not by conservatives – confirms his budget comes extremely close to the spending levels Democrats approved at the end of the General Assembly. The gap compared to the $188 billion overall budget is little more than a rounding error.
For K-12 education, the gap between the two budgets is a few hundred million dollars out of an overall education budget of $24 billion. As you review the list of detailed comparisons made by the Commonwealth Institute for Fiscal Analysis, item after item is the same as in the budget approved in March. That includes funding for healthy teacher and state employee raises the Democrats were so proud to include.
In other cases where the Democrats expanded spending, the Governor accepted 50-75% of what they approved. He pays for some capital projects with debt instead of cash and utilizes money from the Literary Fund for retirement premiums, both legal and common strategies used in the budget for decades. Governors of both parties have done those often.
On the other hand, while the General Assembly refused $1 billion in new discretionary spending sought by the Governor, he is seeking to restore just $230 million of it, mostly in education and economic development.
If Democrats refuse all or most of the Governor’s 242 proposed budget amendments, it will be because they want to hold the Virginia state government hostage to a potential shutdown for a tax increase.
The major tax hike the Democrats included in their budget and seek to restore is an expansion of the sales tax to digital goods and services, including purchases by Virginia businesses.
Even with that tax stripped out, and previous tax changes in 2022 and 2023, Youngkin’s budget 2.0 is 52% larger than the $123 billion overall budget Democrats approved four years ago when they had total control. The General Fund portion has grown 45% in just four years, from $44 to $64 billion. Yet the political left and its allies are exploding in rage that he is “slashing crucial funds” and “jeopardizing the future of our children.”
Faced with a budget based on a tax increase he opposed, the Governor had several options. He could have vetoed the budget entirely, forcing a special session to write a new one. He could have vetoed the sections that imposed the tax, likely to spark a test in court over the extent of his veto powers. He could have put all his proposals into a Governor’s Substitute, leaving the Assembly with just one vote to take on the whole package.
By offering his budget objections as a series of amendments, he took a path that makes it possible to adopt a budget on time. This path also leaves the Governor the ability to review the results of the reconvened session before deciding whether to sign the budget or opt to issue a veto. The Governor’s approach retains flexibility for both him and the legislature.
While there is a dizzying total of 233 amendments, plus nine to House Bill 29 amending the budget for the current fiscal year, not all of them are likely to be equally important to the Governor. Some are technical changes or even corrections. Others are policy issues he cares about, but perhaps not so important that he will veto the budget just because they fail to pass.
One dilemma Democrats might create for him – one easy to predict – is to agree with the Governor and dump the digital sales tax but reject his attempt to remove language related to the Regional Greenhouse Gas Initiative. To rejoin RGGI means the related carbon tax on electricity is also restored.
And while Youngkin vetoed two bills that create the opportunity for additional local sales taxes for schools, following a referendum, both passed with enough votes to override that veto. If that override happens, complaints about the schools being underfunded become even more ludicrous, and a continued budget standoff is even more inexcusable.
Unfortunately, these budget standoffs have become so commonplace in Virginia that the public is bored with them, not paying attention, and the mainstream media coverage of the Assembly is a whisper of previous years. The assumption is that somebody will blink, and disaster will be averted. To assume that this time would be a mistake. The atmosphere is pure poison compared to past disputes.
The liberal group that did the budget comparison, the Commonwealth Institute, is a good example. The numbers on their spreadsheet appear accurate, but the rhetoric accompanying it is pure partisan gamesmanship. In December, when Democrats were pushing income tax increases in committee, that group strongly attacked any attempt to raise or expand the sales tax as regressive, tougher on the poor. They were correct about its disparate impact. Now they claim it was a good idea all along.
And the same press release points to a grand total of $174 million in discrepancies between the Governor’s proposal and the approved Assembly budget (this was before they had done their spreadsheet.) While both the Governor’s proposal and the Assembly proposal represent major spending increases over the current budget, the slight disparities in his plan are presented as “harmful cuts.” A budget fully $25 billion larger in just a single two-year cycle, and $65 billion larger than four years ago, is dismissed as riddled by “cuts.”
Nothing is cut. The Democrats just want to raise taxes to spend more. That will be why Virginia employee pay and retirement checks and state services are threatened after July 1, should reason not override partisanship this week.
First published today by the Thomas Jefferson Institute for Public Policy.
