The 2024 Regular Session of the General Assembly is rapidly winding down. While the work is intense and the hours are long, the days go by very fast. As we approach the final week, I will again focus on the budget.

For the fourth time in the last five years, I have been appointed to the budget conference committee. I am second in seniority on the Senate Finance and Appropriations Committee and chair the Subcommittee on Health and Human Resources, which oversees 30 percent of the state budget. I will have significant responsibilities on the conference committee. The typical twelve hour work days during session transform into 16 hour days, but candidly being able to serve as a budget conferee is the work of a lifetime.

As outlined before, the budgeting process has been complicated by a number of factors. For three years we have seen significant federal investments due to the COVID pandemic. The funding artificially inflated our revenues and made it appear we had big surpluses. We tried to be frugal, but tax cuts drove down our revenues. Job growth and revenues have slowed, in fact we have seen declines in higher paying jobs. Equally troubling is the uncertainty surrounding future Medicaid expenditures. Both the House and the Senate put aside money in the budget this year for Medicaid reserves. However, those set asides, $100 million in the House and $125 million in the Senate, likely will be insufficient. I expect we will need to address Medicaid after an updated forecast in April at the veto session or in a special session later this year. I would anticipate we may need an additional investment of more than $200 million.

A lot of the major issues with respect to the budget remain unresolved. This past week, the budget conference met with the Governor, who restated his priorities that were contained in his presentation in December. You will recall that he proposed about $2.1 billion in additional tax cuts in the form of a 12-percent across the board reduction in the income tax. The Governor counteracts some of that with a 9 percent sales tax increase that would raise about $900 million, leaving a $1.2 billion deficit over the biennium.

Both the House and Senate rejected the Governor’s plan to cut income taxes but adopted part of his plan with respect to the sales tax. While rejecting the general sales tax increase, both the House and Senate agreed to the Governor’s idea to apply sales tax to digital sales, such as streaming and music and audiobook downloads. The House adopted that portion of the Governor’s proposal, which generates about $500 million over the biennium. The Senate extended the proposal to include business to business transactions, which added an additional $800 million. The Governor has indicated that his proposal to increase taxes was part of a package deal that involved a larger tax cut, and he is not open to these tax increases underpinning the Senate and House budgets.

In addition to pushing for tax cuts, the Governor is also determined to proceed with the lab school experiment in Virginia. Finally, as discussed in previous newsletters, he is focused on building an arena for the Washington Wizards and the Washington Capitals in Alexandria.

I have expressed my concerns about the arena plan to other legislators, to representatives of Monumental, and in my newsletters. The full faith and credit of the Commonwealth will be put at risk by the bonds associated with the project. The transportation needs of Alexandria are not adequately addressed in the Governor’s plan. I have also expressed that there are terms under which this could be a good deal for Virginia by bringing investment, tax revenue, and job growth. All negotiations involve identifying areas of compromise and possible items that can be used as leverage. At our meeting with the Governor, both House Appropriations Chair Luke Torian of Prince William and Senate Finance and Appropriations Chair Louise Lucas of Portsmouth advised the Governor and all the conferees to remain flexible in their thinking as we work towards compromise.

The Democratic General Assembly has passed a number of significant bills that the Governor may be reluctant to sign. However, speculation is rampant about whether he would consider signing them or allowing them to become law without his signature if linked to a larger deal that includes the arena. While it is hard to speculate about what action the Governor may take, my guess is the answer hinges on whether Governor Youngkin is intent on getting things done as Governor or continues to harbor ambitions on the national level. If he wants to play to a Republican base in future elections, deals that would be satisfactory to Democratic legislators and voters are likely not on the table.

All I know is that for the next week, there will be long days and sleepless nights until we get a budget. Under the Rules of the Senate and House, the budget must be finalized by Wednesday night, to allow members sufficient time – 48 hours – to review the conference report before the vote. We have our work cut out for us.

Thank you again for allowing me to serve you in the General Assembly. It remains one of the highest honors of my life. If I may be of service to you in the waning days of the legislative session, please contact me at (804) 698-7511 or senatordeeds@senate.virginia.gov. Beginning the week of March 11, we will be back in Charlottesville and can be reached at (434) 296-5491.