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Virginia lawmakers to vote on tax cuts in compromise state budget plan

The Virginia Capitol in Richmond. (Steve Helber/AP)

RICHMOND — Virginia lawmakers return to the Capitol on Wednesday to vote on a state budget that includes billions in tax relief as well as more money for teachers and other public employees and record spending on education.

The budget deal, reached by House and Senate negotiators in the weeks since the General Assembly wrapped up its regular session March 15, also includes language setting out new penalties for possession of small amounts of marijuana.

In addition, Democrats in the House will vote on new leadership, with Del. Don L. Scott Jr. (Portsmouth) — a relative newcomer — vying with at least two veteran lawmakers to serve as House minority leader.

Virginia budget compromise gives Gov. Glenn Youngkin partial win

The state’s two-year spending plan is the star of the show, with Gov. Glenn Youngkin (R) hoping to get at least a modest victory on his campaign for sweeping tax cuts. Republicans who control the House of Delegates had passed a package of tax breaks that cost about $3 billion more than those passed by the Democratic-controlled Senate, leading to a stalemate that prevented lawmakers from agreeing on a budget during this year’s regular legislative session.

Last week, negotiators said they had finally reached a compromise deal that gives Youngkin some but not all of his wishes. The centerpiece: increasing the standard income tax deduction, which Youngkin had wanted to double. The legislature’s proposed budget would fall just short of that, increasing it from the current $4,500 for individuals and $9,000 for joint filers to $8,000 and $16,000, respectively.

But the increases would take place only if state revenue continues to grow by certain amounts, and would end before the 2026 tax year.

Virginia General Assembly adjourns with job unfinished

The agreement also calls for cutting the 1.5 percent state tax on groceries but not the additional 1 percent grocery tax that localities may levy. Youngkin had wanted to eliminate both.

Lawmakers did not agree to suspend the state’s gasoline tax, which Youngkin had proposed. But they went along with his proposal to reduce taxes on military pensions, which they would phase in over several years.

The General Assembly’s proposed budget also achieves a longtime goal of Democrats: making 15 percent of the earned income tax credit refundable for low-income working families.

“This is an historic budget in many ways,” said Del. Mark D. Sickles (D-Fairfax), who was part of the negotiating team. “Most of the things people expect states and want states to do, we‘ve done more than ever,” he said, crediting an almost unprecedented surge in revenue.

A faster-than-expected recovery from the economic wound of the pandemic, as well as waves of federal relief payments related to the health emergency, have left the state with billions in surplus revenue.

That allowed budget negotiators to pair tax cuts with big investments in a number of areas, including K-12 and higher education, the state retirement system, human services and water-quality programs.

The budget compromise includes enough money for every K-12 campus to employ a school resource officer, said Sen. George L. Barker (D-Fairfax), who worked closely on negotiations.

“Right now 90 percent of high schools and middle schools have them, but less than 50 percent of elementary do,” Barker said. School divisions would not be required to assign officers to every campus, but the state would fully pick up the cost for the length of the two-year budget; after that, the cost would be split between local and state government according to a formula based on the locality’s ability to pay.

The budget also boosts reimbursement rates for group homes and others that provide services to people with mental illness or intellectual or developmental disabilities, and for medical professionals who provide services to Medicaid recipients.

Once the General Assembly passes the budget, it can take several days for it to reach the governor’s desk. At that point, he has seven days to propose amendments. The legislature will return to the Capitol after that to consider any amendments.

House Appropriations Chairman Del. Barry D. Knight (R-Virginia Beach) said he has encouraged Youngkin to accept the compromise bill with little or no tinkering, adding that he had promised his counterpart in the Senate — Sen. Janet D. Howell (D-Fairfax), who chairs the Finance Committee — to stand firmly by their deal.

“We operated in good faith with each other, and I committed to her that I would use what little influence that I had [with Youngkin],” Knight said in an interview last week. “It’s called the legislative budget. His prerogative is to amend it, and we think we have a very good instrument going forward, and we would hope he would recognize it for the good instrument that it is. And that message was conveyed to him in a very polite manner, and he was very polite and said he understood that.”

In a written statement, Youngkin said he had just started reviewing the budget Tuesday morning. “Based on what I’ve seen I feel that it is a really good framework,” he said, adding that it is “an opportunity for all of us to come together as Virginians.”

“I would encourage the General Assembly to get it across the finish line Wednesday,” he said. “Then we will take some time and review it and see if there are amendments that are needed.”

Youngkin proposes new crimes for pot possession, changes to CBD retail

The marijuana provision was an unusual component of the budget agreement, aimed at solving a legislative stalemate over one element of Virginia’s legalization effort.

Under a legalization plan passed last year, adults may possess up to an ounce of recreational marijuana, though the state has not yet implemented a process for the legal sale of weed. Possessing an amount between an ounce and a pound currently is punishable with a civil fine, but having more than a pound is considered a felony.

The proposed budget language would make it a misdemeanor to possess more than four ounces or up to a pound. Some lawmakers have argued that creating a new criminal category goes against the idea of legalization.

The budget plan also includes language to close a loophole that allows sports betting operations to claim unintentionally low tax rates. Sickles, who had sponsored a related bill that didn’t make it out of the legislative session, said the change fixes an error that has led to only five of the state’s 12 licensed sports betting vendors having to pay any state taxes.

Before the legislature convenes at 10 a.m. Wednesday, House Democrats will caucus and are expected to vote on new leadership. Scott, in only his second term, led an uprising last month in which Democrats ousted former House Speaker Eileen Filler-Corn (Fairfax) as minority leader, partly out of frustration that the party lost its majority in the chamber in last fall’s elections.

Scott is said to be vying for the top party role against at least two rivals — Del. Charniele L. Herring (D-Alexandria), who is the caucus chairwoman, and Del. Richard C. “Rip” Sullivan Jr. (D-Fairfax).

correction

A previous version of this article incorrectly identified Del. Charniele L. Herring as from Arlington. She is from Alexandria. The article has been corrected.

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