Virginia’s 2-Year State Budget Approved – Governor Youngkin Continues Push to Cut Gas Tax

The Virginia General Assembly passed a two-year state budget this week that both cuts taxes and increases spending, a rare combination that drew extensive bipartisan support in both the Democratic-controlled Senate and Republican-controlled House of Delegates. 

The budget also eliminates the 1.5 percent state tax on groceries which went to transportation but leaves intact the additional 1 percent grocery tax that localities may impose. Youngkin had wanted to eliminate both. Lawmakers did not agree to suspend the state’s gasoline tax, which Youngkin had proposed. 
 
VTCA is very pleased the legislature listened to the coalition we co-lead with 60 other business, trade, and community groups – Virginian's For Better Transportation (VBT) who say the gas tax holiday is bad policy and short-cited.  
 
VTCA was committed to opposing the gas tax holiday and re-engaged VBT and added additional trade groups and supporters wrote numerous op-eds in newspapers across Virginia and developed a digital marketing campaign to get VBT’s 6,000 subscribers to contract legislators expressing concern with the long-term negative impacts of cutting the gas tax. 
 
VTCA continues to remind legislators, this budget takes about $189 Million out of transportation funding from the grocery tax cut every year without backfilling.  We will continue to fight to get this funding restored in the future.      
 
A new twist emerges - Transportation funding back in general fund again  

Some legislators in both chambers expressed surprise about the budget’s commitment of what Delegate Marcus Simon called an “earmark” of state general funds to widen a 29-mile segment of Interstate 64 between Bottoms Bridge in New Kent County and Lightfoot in James City County.  Traditionally, the money committees kept transportation funding out of the general fund and relied on dedicated sources like the gas tax, sales tax, and vehicle registration fees. 

The budget includes $320 million for the I-64 project as well as an additional $150 million if state revenues continue to grow through the end of the fiscal year on June 30 and in the next revenue forecast in August. 
Del. Danica Roem, D-Prince William, who is running for Senate in a newly drawn district in Northern Virginia next year, questioned House Appropriations Committee Chairman, Delegate Barry Knight, R-Virginia Beach closely about the effect of the commitment on other highway projects that must compete for money under the state’s competitive Smart Scale program. 

“This re-establishes an old precedent ... in using general fund dollars to fund major transportation projects,” Roem warned. 

Del. Knight promised that other highway projects “will not take a hit,” predicting instead that the use of general funds would “free up” dedicated transportation funding for other projects across the state. 

Del. Roem also questioned the budget committee chair about the decision not to replace about $189 million in transportation money that the state will lose over the next two years by repealing a portion of the state grocery tax dedicated to transportation. In contrast, the budget compromise uses $158 million in state funds to offset the loss of the portion of the grocery tax that now goes to local school divisions. 

Knight said the state can afford the initial loss of transportation funds because “we have unprecedented revenues now.” 

Other key components of the budget are: 

• $1.25 billion for school construction and renovation. 
• At least $320 million (and up to $470 million) to widen Interstate 64 to three lanes between Richmond and Williamsburg. VDOT will be expected to move as fast as it can. 
• A 10 percent raise for state employees and teachers spread across the two budget years, as well as a $1,000 one-time bonus in the first year. 

The legislative process on the new budget, which takes effect July 1, has one more step. Youngkin can propose the governor’s amendments to these bills, just as with other bills. Any final changes he proposes need simple majorities in both chambers to be adopted, still a challenge in the Democratic-controlled Senate, but he is likely to try that avenue. The legislature is expected back in Richmond for final, final approval of the budget on June 17.