Bloxom: Budget deal reached after revenue dispute delays spending plan

I am happy to report that a budget has been agreed upon by the House and the Senate. The Governor has only seven days to act, as July 1 is the deadline for a spending plan to be in place.

There is certainly a lot in the budget to be happy about, as well as some things that I oppose. It was a long and tedious path, not because of differences in spending priorities, but because the chairmen could not agree on the revenues that were available to spend. I went to Richmond numerous times, only to drive home after the two chairpersons thought they had reached an agreement, only for the revenue numbers to change.

We started the year with Governor Youngkin leaving the state in a strong financial position, with $1.8 billion in excess revenue available to spend. When we met during the session in February, the Senate decided to raise additional revenue by taxing the data center industry. They included an extra $1.2 billion in their proposed budget on top of the $1.8 billion Governor Youngkin left. This set up a standoff between the House and the Senate.

The Governor reforecasted revenues in June, and both sales tax revenue and withholding tax collections increased, adding another $1.2 billion to available revenues. Again, we need to thank Governor Youngkin for the strong economy that Governor Spanberger inherited.

At that point, we moved closer to the Senate’s position on many of their spending priorities, even without meeting with them in conference. We were running out of time to get a spending plan in place, so we held a press conference in an effort to encourage the Senate to respond.

If a budget is not adopted by July 1, all funding that supports teachers and law enforcement, whether they are state employees or supported by state funding, would stop. In Virginia, we do not use continuing spending resolutions, nor do we issue IOUs for back pay.

The Senate then countered by accepting our suggested revenue and spending increases while adding another $1.8 billion through a larger data center tax, along with additional spending. This is when Senator Lucas began her anti-data center tour across Virginia. That move put both the House and the Governor, who had publicly backed the House position, on the defensive once again.

I was called back to Richmond with no revenue agreement in place, but with time running out, we had to do something.  After waiting an hour beyond our scheduled conference meeting with the Senate, a deal was finally struck. The data center tax was relabeled as a consumption fee on the electricity used. The fee was capped at the $1.2 billion level for the biennium.

Once the revenue issue was resolved, we were able to confer with our counterparts from the Senate. With the additional revenues available, the conference process which takes place in small groups, moved quickly. Other than a few chairman-level decisions, we completed our work in a single twelve-hour day.

This late budget does put our localities in a bind, as their budgets were formulated using lower state revenue projections. July 1 is the deadline for all localities to have a budget in place.

Over the next couple of weeks, I will report on items of interest within the budget, and I will also try to provide context for the data center debate that delayed its passage. As always, please feel free to contact my staff or me with any questions or concerns you may have by calling my district office at (757)824-3456 or by emailing me at delrbloxom@house.virginia.gov