Democrats Secure Funds for Education, Mental Health, Tax Rebates in Budget Deal

Photo by Vladimir Solomianyi on Unsplash

By Carolyn Fiddler

August 25, 2023

An almost six-month budget standoff between Republican and Democratic lawmakers and Gov. Glenn Youngkin has finally ended with Democrats securing key wins on education and mental health funding, as well as their one-time tax rebate plan.  .

Budget negotiation leaders Del. Barry Knight (R-Virginia Beach) and Sens. Janet Howell and George Barker (both D-Fairfax) announced that the agreement “prioritize[s] investments in education at all levels to ensure that our students recover from pandemic learning loss and are workforce ready.”

“The deal is one that provides Virginians with additional tax relief and unprecedented investments in education, natural resources, and behavioral health,” their joint statement added. “It is a win-win for the citizens of Virginia.”

The parts of the agreement that will be felt most immediately by Virginians include reinstating a summer sales tax holiday and a one-time tax rebate of $200 for individuals and $400 for joint filers. The agreement also increases the standard deduction to $8,500 for single tax filers and $17,000 for joint filers.

The deal also increases financial aid and provides more support for maintaining college affordability.

Virginia’s state budgets operate on a two-year cycle, with lawmakers traditionally revising the plan in odd years to account for changing fiscal circumstances and new legislation. This year’s standoff was among the longest in recent history.

This year’s extended budget impasse didn’t result in a government shutdown, as last year’s biennial budget remains in place. But the failure to agree on amendments left billions in surplus funds unallocated while also hamstringing other initiatives greenlit by the legislature this year, including new positions to enforce stricter rules on cannabis-adjacent products, teacher raises, and investments in Virginia’s struggling behavioral health system.

The issue wasn’t a lack of funds; Virginia has a surplus of more than $3 billion. The dispute centered on how much of that money to use to fund core government programs like education and mental health care and both how and how much to return to taxpayers.

Virginia’s school divisions are among those breathing the heaviest sighs of relief at news of the budget agreement. Typically, districts learn how much funding to expect from the state for the coming school year long before July 1, and they plan for the upcoming school year accordingly. But without an agreement in place and students already returning to classrooms in many parts of the state, schools have been scrambling to make adjustments.

While both lawmakers and school administrators welcome news of the budget agreement, the fight isn’t actually over quite yet. Lawmakers must convene a special session to formally vote on the budget amendments, and then the governor must sign them into law – two generally pro forma things that may be more complicated than normal.

The first complication is that all 140 General Assembly seats are on the ballot this fall, and the vast majority of lawmakers who will need to convene to pass these amendments are in the thick of their own election campaigns. The bipartisan agreement was announced just over a month before early voting begins.

The other potential complication is the governor himself. Youngkin had his own set of demands for the state budget amendments, including permanent tax cuts for corporations and for the wealthiest Virginians, and he appears to have won none of them. As budget negotiations appeared to near resolution, Youngkin told reporters that Democrats’ one-time tax relief proposal was “a compromise [he’d] be willing to accept.” He was slow to respond to news of a final agreement being reached.

Even if Youngkin accepts and signs the new budget amendments into law, he won’t have to wait very long to take another shot at those tax cuts for corporations and the wealthy; the governor will submit his proposed two-year budget to the legislature in December, and the ensuing battle over Virginia’s fiscal future will be the centerpiece of the next General Assembly session.

  • Carolyn Fiddler

    Carolyn Fiddler is Dogwood's chief political correspondent. She is also the nation’s foremost expert in state politics with almost two decades of experience in statehouse machinations, and her comic book collection is probably bigger than yours.

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