RICHMOND, Va. (CN) — Virginia Governor Glenn Youngkin touted the state's increasing revenue as a cause for tax relief Wednesday, but advocates argue key areas remain underfunded.
The Republican governor emphasized job growth, record investments and business-friendly tax policies when reviewing Virginia's 2024 fiscal year at a joint Senate Finance & Appropriations, House Appropriations and House Finance committees meeting.
"What we're doing is working," Youngkin said in a press gaggle. "Virginia has gone from being behind to being in the lead."
General fund revenues for 2024 exceeded the state's forecasted amount by $1.72 billion, leaving Virginia with $155 million in surplus funds. According to the Bureau of Labor Statistics, Virginia has gained 86,800 jobs in the past year, an annual growth rate of 2.1%.
Youngkin claimed that during his administration, which is slated to end in 2026, Virginia will return nearly $8 billion to taxpayers. The state's previous budget, which was passed in 2022 and was in effect until June 31, 2024, provided $3.7 billion in tax relief.
"It's not the government's money," Youngkin said during his address. "It belongs to Virginians."
Senate of Virginia Democrats, however, said gains under Youngkin's administration haven't been universal.
"Although the governor may view our financial surplus as an indication of over-taxation, it's crucial to recognize that a true surplus cannot exist alongside underfunded essential systems," the Senate Democratic caucus said in a statement.
In the 2024 legislative session, Democrats proposed expanding the sales tax to include digital goods and services while Youngkin looked for ways to offer $1 billion in tax relief by slashing the income tax. The final budget that went into effect on July 1 leaves the state tax code as-is.
The current budget allows for record investments in K-12 education, public safety and mental health resources. But Rhena Hicks, executive director of the nonprofit organization Freedom Virginia, said the claim as to education funding is misleading because the Youngkin administration was including federal funding to boost the numbers.
The current budget increased education funding by $2.5 billion, provided a 3% raise for state employees, teachers and support staff, and increased funding for child care by $500 million.
Hicks pointed to the Joint Legislative Audit and Review Commission's recommendations that call for around $3.5 billion to fund schools fully.
"That's where we think any surplus money should be going," Hicks said during a phone call. "It's hard to say we have a surplus when we have really critical building blocks for Virginian that are underfunded."
Conservation is another area advocates feel remains underfunded. Richmond is looking at more than half a billion dollars to update its antiquated wastewater system that discharges stormwater and raw sewage into the James River during heavy rainfall. Budget negotiators rejected a $100 million proposal to fund the project in May.
In addition, Youngkin's concession on tax relief came with a price: Democrats agreed to scrap language from the original budget that would require Virginia to rejoin the Regional Greenhouse Gas Initiative, a multistate carbon cap-and-invest program that raises revenue through selling allowances to energy producers.
"Staying out of RGGI, and foregoing the hundreds of millions of dollars it generates each year, further burdens already disadvantaged communities on the frontlines of pollution and flooding impacts, and who shoulder disproportionate household energy costs," leaders from Virginia's environmental advocacy community wrote in a press release.
In a move that's still being litigated, Youngkin circumvented legislators' approval and removed Virginia from the initiative, citing the increased cost of utilities for consumers. The budget includes no funding for energy efficiency upgrades to new and existing residential buildings that used to be funded through the Regional Greenhouse Gas Initiative, according to Lee Francis, deputy director of the Virginia League of Conservation Voters.
Freddy Mejia, policy director for the Commonwealth Institute, said in an interview that Youngkin's yearning for tax relief helps the wealthy more than others.
"We certainly feel there is a moment and an ability to provide targeted tax relief to the families that need them most," Mejia said. "Based on previous proposals, Governor Youngkin has shown that his tax proposal mostly benefits the wealthy and as well as corporations."
Youngkin told reporters that eliminating the vehicle tax and reducing corporate taxes are on the table for budget amendment proposals he will offer in December.
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