RICHMOND, Va. (WRIC) — Despite lingering concerns over a recession, Virginia’s finance secretary voiced optimism Tuesday about the commonwealth’s economic outlook — and Gov. Glenn Youngkin’s push for $1 billion in tax cuts.
Secretary of Finance Stephen E. Cummings told the Virginia Senate Finance Committee that the commonwealth has an “appropriate cushion” in case a delayed recession hits the country. He wrote to Youngkin that he expects a mild recession in the next fiscal year — which starts in July.
“We’ve got more money in the bank. We remain, still, cautious about the future. We still believe that we are going to have a delayed recession. There’s a lot of debate,” Cummings told the Senate committee Tuesday. “I think people have become much more hopeful and optimistic.
He cited general fund revenues exceeding projections by $948 million year-to-date, cooling inflation and job gains. There are warning signs that Virginia is not in the clear, including a rise in unemployment insurance claims and fears over another hike in interest rates by the Federal Reserve.
Senate Minority Leader Tommy Norment (R-James City) asked whether the latest revenue numbers have changed the Youngkin administration’s position on the governor’s budget proposal to include $1 billion in new tax cuts.
“We feel really good about where we are,” Cummings responded. “I think that we feel like we couldn’t be in a better spot to have the right conversation with the cushions for things that we think create more uncertainty.”
Virginia is still watching what the Federal Reserve plans to do with interest rates, and whether it plans, as officials have signaled, to put a pause on increasing rates to deal with inflation.
But Cummings repeated that Virginia has “got money in the bank to deal” with those concerns and follow through on the governor’s plans, backing Youngkin’s argument from April that a $3.6 billion surplus ensures there’s “plenty of money” for his proposed tax cuts and key investments in the state’s education and behavioral health systems.
Youngkin reiterated that position Tuesday in a statement following the release of the latest state revenue report.
“There continues to be plenty of money in the system for commonsense priorities to lower costs and cut taxes for families and local businesses while making critical investments in shared goals like the transformation of Virginia’s behavioral health system,” Youngkin said.
With Virginia operating on a two-year budget cycle, negotiators have been adamant that they don’t need to rush the process as they remain at odds over Youngkin’s proposed tax cuts for corporations and the highest earners.
House Republicans have backed Youngkin’s proposals to cut the corporate income tax rate from 6% to 5% — a move his administration said would help entice companies to Virginia — and reduce the top income tax rate from 5.75% to 5.5%.
Democrats haven’t dismissed all the proposed tax cuts but have made their opposition to the corporate tax cut clear. They believe the $3.6 billion surplus Youngkin has touted to pay for the cuts should fund other initiatives.
Budget negotiators have pointed to Virginia’s economic uncertainty as the reason for the budget impasse and for holding off on reaching a deal until after the June 20 primaries.
But Sen. Norment told the Virginia Mercury after Tuesday’s committee meeting that he believes the talks have been held up because “some of the leaders have been distracted” by the primaries.
One of the Senate budget negotiators, state Sen. Janet D. Howell (D-Fairfax), the co-chair of the Senate Finance and Appropriations Committee, called the presentation “very, very informative.”
Unlike the finance committee’s other co-chair, state Sen. George L. Barker (D-Fairfax), Sen. Howell does not have a primary challenger as she decided not to seek re-election.