RICHMOND, Va. (WRIC) — After months of closed-door negotiations, lawmakers have released a budget deal that includes significant tax cuts, pay raises for state employees and new investments in education. It also addresses marijuana policy and lays out a plan for the possible approval of another casino in Virginia.
The compromise strikes a balance between plans proposed by the Democrat-controlled Senate and the Republican-led House of Delegates. The General Assembly is expected to vote on the two-year budget when lawmakers return to Richmond on Wednesday, June 1.
“We didn’t get all we wanted but I think, in view of what we got, we are very satisfied,” House Appropriations Committee Chairman Delegate Barry Knight (R-Virginia Beach) said. “I don’t think that the Senate prevailed over the House or the House prevailed over the Senate.”
“What we have is a budget that is good for taxpayers in Virginia but also good for the people who need services,” Senator George Barker (D-Fairfax), another top negotiator, said. “I think most of those things…that were really, truly needed and where it was critical to be able to do it, we actually got it done.”
Gov. Glenn Youngkin will have a chance to make changes after lawmakers vote. On Monday, a spokesperson said Youngkin’s cabinet is still reviewing the deal.
Here are some highlights:
The proposed compromise includes roughly $4 billion in tax cuts overall, according to Knight.
Effective January 1, 2023, it would slash the state’s 1.5% tax on groceries and essential personal hygiene products. It leaves the 1% local component in place.
There’s also an income tax break for retired veterans age 55 or older. The plan adopts the House’s position by exempting up to $40,000, phased in over four years, rather than the $20,000 maximum proposed by the Senate.
The compromise increases the standard deduction from $4,500 for individuals and $9,000 for joint filers to $8,000 and $16,000 respectively. This falls just below Gov. Youngkin’s push to double the amount of income exempt from taxation at the state level.
The deal also proposes making up to 15% of the federal Earned Income Tax Credit (EITC) refundable for certain low-income, working families. This was prioritized by former Gov. Ralph Northam.
Additionally, negotiators settled on one-time tax rebates of up to $250 for individuals and $500 for married couples. Knight said eligible state income tax filers will get checks sometime after July 1. He expects it to take a couple of months to get them out the door.
One proposal that got a lot of attention but didn’t make the cut was Youngkin’s 90-day state gas tax holiday. The budget was considered the last chance for the proposal after it was shot down by the Senate Finance and Appropriations Committee on a bipartisan vote earlier this year.
“With that type of large rejection, it was clear it was not something that was going to be included in the final budget here and nobody really argued about that because we all sort of knew the reality of the situation,” Barker said.
“They said we do not want the gas tax holiday and I had to pick my battles,” Knight echoed.
Marijuana and hemp
The budget deal revisits further regulation of certain products containing THC and some penalties for recreational marijuana. These topics were previously addressed in legislation that died after undergoing significant debate earlier this year.
The budget language is considered a temporary fix until a new bill can be introduced, which may not happen until next year. A spokesperson for Youngkin declined to comment when asked if he plans to send down fresh legislation for consideration when lawmakers return to the State Capitol later this week.
The compromise creates new labeling and testing requirements for industrial hemp products. It bans the sale of edible substances containing THC to anyone under 21 years of age, with certain exceptions related to medical cannabis. It also prohibits the sale of products sold in “certain child-friendly shapes or that are counterfeit products.”
Dylan Bishop, a lobbyist with the Cannabis Business Association of Virginia, praised the willingness of budget conferees and the Youngkin Administration to work with the industry to develop the proposed framework.
“It adequately addresses the legitimate public safety concern over irresponsibly packaged and labeled products without unfairly disadvantaging Virginia’s farmers, retailers and small businesses,” Bishop said in a statement.
“This would maintain existing loopholes,” said Virginia NORML Executive Director J.M. Pedini, who backed a bill regulating Delta-8 cannabis products due to safety concerns.
The budget would also create new misdemeanor penalties for public possession of recreational marijuana starting at four ounces, an effort some advocates have likened to the War on Drugs. It clarifies that this limit does not apply to possession for personal use in a private residence, according to Pedini.
“It’s more in line with what other states are doing so we’re not an anomaly out there by ourselves. We know our law enforcement wanted it,” Knight said.
“I don’t think that will change what happens with the vote on the budget,” Barker said.
Pedini said any amount between an ounce and four ounces would remain punishable by a $25 fine and anything above sixteen ounces would be a felony.
The budget language also clarifies and lowers penalties for those who don’t comply with regulations surrounding the home cultivation of marijuana. Pedini said failing to properly label plants, and keep them out of public view or out of reach of children would be a $25 fine, rather than a felony.
Casinos and skill games
The budget deal also takes a stance on gambling policy as the state prepares to open casinos in certain localities and grapples with a court battle over so-called skill games.
After a previous ballot referendum failed in Richmond, the plan would allow the city to hold a second vote on a possible casino in November 2023.
However, it would prevent the licensing of the project from moving forward until a study is complete on a separate proposal in Petersburg.
Asked if lawmakers could allow both projects to move forward, Knight said, “I doubt that very seriously. The original casino bill said five casinos. We like to spread the casinos out.”
With the fate of skill games tied up in court, Knight said the budget also seeks to clarify the definition of the machines.
“We are not saying they are outlawed. We’re not saying they’re legal. We’re just setting out the definitions. It’s going to court. We’ll let the judge decide,” Knight said.
The budget deal proposes significant raises across several professions.
It gives state employees, including teachers, a 5% raise in each of the next two fiscal years, as well as a $1,000 bonus in the first year. If the plan is approved, Knight said the first 5% should take effect on Aug. 1, 2022, and he expects the bonuses to be paid out in December.
Knight said the budget deal also has larger, targeted increases for certain law enforcement professionals. For example, the proposed minimum salary for corrections officers and sheriff’s deputies is $42,000 annually, an increase of more than 19%.
Wayne Huggins with the Virginia State Police Association said entry-level troopers should see their pay go up to about $52,000 annually, an increase of nearly 8%.
“We have been dealing with the pay compression issue for years. This budget is going to address it and solve it,” Huggins said.
Under the plan, entry-level law enforcement positions poised to get a bigger pay boost (7.5% or more) would also benefit from raises impacting other state employees. However, they’ll get 2.5% in the first year and 5% in the second year. More experienced employees will get 5% in each of the next two years, according to Huggins.
Virginia Sheriffs’ Association Executive Director John Jones said the spending plan also raises pay for more senior employees at a rate of $100 per year of service. Eligible employees must have at least three years of service with the same agency and raise caps at 30 years, according to Jones.
“We knew we had to pay them more money to retain them, so we have really focused on our employees for the state,” Knight said.
On top of teacher raises, the budget deal includes significant new investments in K-12 education.
The spotlight has been on school resource officers after a mass shooting devastated a Texas elementary school. Knight said the budget includes additional funding for new SROs, as Youngkin requested.
“If the school systems take full advantage of this, it’ll be one SRO in every high school, every middle school, every junior high school, and at least one SRO for every other elementary school,” Knight said.
The compromise also includes a partial win for Youngkin on his push to expand alternatives to traditional public schools. It allocates $100 million to kick start new lab schools, rather than the $150 million Youngkin asked for.
The budget also allocates additional funding to support school construction and modernization. It provides direct aid for new English-learner teachers, full-time principals, support positions and reading specialists in K-12. It also invests in the at-risk add-on for high-poverty districts.