By Derrick Max
We have reached sine die of the 2024 General Assembly legislative session. During this session, over a thousand individual bills and a nearly 500-page biennial budget were sent to the Governor. All of this must be reviewed and acted upon by Governor Glenn Youngkin (R) before the April 17 reconvened session.
There may be hundreds of bills on the Governor’s desk worthy of his veto. Additionally, Democrats inserted partisan policy decisions within the budget in such a way that the Governor may need to veto it in its entirety. As Senator Creigh Deeds (D-Charlottesville) noted in his end-of-session constituent letter: “The budget includes items the Governor does not support, and some of those may be difficult for the Governor to veto because they are woven into the fabric of the budget itself. Speculation is rampant that he may opt to veto the budget, which would set us up for another prolonged budget debate.”
Governor Youngkin should not hesitate to use his veto pen liberally, including on the budget. As former Governor Terry McAuliffe (D) said, “The veto is not a decision I take lightly, but it is a necessary tool to prevent harmful legislation from becoming law. I will continue to stand up for the values and priorities of the people of Virginia by exercising this authority judiciously.” Governor McAuliffe had the highest number of vetoes in recent years when he faced Republican majorities in both chambers, vetoing 49 bills in 2017 alone and 120 during his entire term.
Governor Ralph Northam (D) had two years with Republicans running both chambers and he vetoed 54 bills over that span. Governor Youngkin has already vetoed 8 bills this session and 33 in 2022 and another 8 in 2023. It is time for the Governor to set a new veto record, as this General Assembly, with many of its moderate members now retired, passed many bills they knew would be vetoed. In fact, many of the bills sent to Governor Youngkin this session were bills the Democrats failed to pass in previous sessions.
The Thomas Jefferson Institute believes the following bills and budget provisions would have the greatest negative economic impact on the Commonwealth. We were vocal in our opposition to these bills as they were being considered, testified in opposition when we could, and have communicated our concerns to the Governor and his staff. This is just part of the overall list of veto-worthy legislation.
If you would like to express your opposition to the Governor (or your support for him to veto or reject these provisions), you can call his office at (804) 786-2211 or email your concerns directly to glenn.youngkin@governor.virginia.gov.
Minimum Wage Increase and Expansion to Migrant Workers HB1/SB1 and HB157
The bill that causes the most harm, especially to low- and moderate-income families, is the increase in the minimum wage, despite its good intentions. This bill increases the minimum wage to $13.50 per hour next year and $15 per hour the year after, with future automatic increases tied to inflation. A related bill removes the exemption for migrant workers, which means struggling farmers across the Commonwealth will have to pay significant increases in wages to their migrant laborers (an estimated 75 percent of all agricultural workers in Virginia are migrant workers) or find ways to forgo as much migrant labor as possible. These costs will be passed on in the form of higher prices for food and services.
Paid Family and Medical Leave HB373
This bill creates the largest payroll tax in the Commonwealth’s history. Specifically, it creates a state-run insurance program by charging an estimated 1% payroll tax divided between employers and employees. This fund will provide 12 weeks of 80 percent of wages for employees taking family or medical leave. This is a massive tax increase that will be borne mostly by employees (employers shift the cost of employee taxes onto employees by paying them lower wages). It is not a coincidence that the 13 states that already have paid family and medical leave are the states with the highest unemployment rates, lowest job growth, and highest number of people and businesses leaving their states.
Class Action Lawsuits HB418
Virginia is one of only two states that does not allow petitioners to seek or create “classes” for the purpose of civil liability claims (class action lawsuits). This bill would make class action law suits a new risk of doing business in the Commonwealth. This bill will increase civil liability claims and thus increase insurance costs. It will also increase the workload of our already overburdened courts. This bill would remove one competitive advantage of doing business in the Commonwealth and it would redirect money away from productive and creative uses to fund legal departments and outside counsel.
Business to Business Digital Sales Tax HB30, 4th Enactment Clause
The largest and most economically damaging tax increase of the 2024 session is the expansion of the sales and use tax to digital products and services, including certain purchases made by businesses. Business to business transactions are usually exempt from the sales tax, so this is a major policy change. Only a handful of states now tax these transactions. As part of a reform package, including counterbalancing tax reductions, this policy change had merit. On its own it is just a major tax increase to allow for a massive $2 billion increase in the state’s spending.
Regional Greenhouse Gas Initiative HB 29 & 30, Item 381, C.
This new budget language orders the Governor and the Air Pollution Control Board to reinstate Virginia’s membership in the Regional Greenhouse Gas Initiative. Virginia just left that multistate cap and trade compact at the end of 2023. In just three years it had forced utilities to pay Virginia $830 million for permits to burn coal and natural gas for electricity, money which ultimately was or will be paid by utility customers. It is nothing but a carbon tax and has no actual effect of lowering the use of those fuels, beyond the economic impact of raising their cost.
Local Sales and Use Tax for Localities/Schools HB805/SB14
One tax increase cleared the General Assembly with so many votes, including numerous Republicans, that a veto will not succeed unless some members change their minds. House Bill 805 and Senate Bill 14 allow most Virginia cities and counties to increase the sales tax another 1%, with the funds dedicated to educational capital projects (buildings and equipment). The law requires that a local referendum be held first, but that does not relieve legislators of their responsibility for the outcome.
Procurement Set-Asides HB1404
This bill increases the Small, Women and Minority (SWaM) procurement set- asides, with goals of 42 percent for small business direct procurement of discretionary executive branch spending and 50 percent of SWaM set-aside for subcontracts by non-SWaM contracts with an overall goal of 23.1 percent of certified women-owned and minority-owned business utilization in all discretionary spending by covered institutions. It is likely that contract bid prices will be higher as competition will be more limited. This bill will also continue the unhealthy racializing and gendering in contracting instead of focusing on price and quality of services.
Bad Faith Claims in Motor Vehicle Insurance SB256
This bill would establish a new tort of insurance bad faith with the right to impose penalties of double the personal injury or wrongful death (up to $500,000 plus lawyers’ fees) on motor vehicle insurers who fail to make “reasonable and timely” settlement offers to insureds or in cases of uninsured/underinsured benefit claims. Such “bad faith claims” (of which there have only been a handful over the last five years) are currently handled by the State Corporation Commission. The AIPC released an analysis that concluded this bill, to address a problem that is uncommon, could increase insurance premiums for individuals and businesses in the Commonwealth between 5.6 percent and 14.3 percent, with a median estimated impact of 9.9 percent premium increase per year.
Derrick Max is President of the Thomas Jefferson Institute of Public Policy. This is a slightly abridged version of a column it published earlier today.
