Proposed Budget Highlights
The governor’s budget amendments for fiscal 2025 and fiscal 2026 prioritize tax relief for working Virginians, expand educational opportunities for students, keep communities safe, and make critical investments in health care, economic development, and technology infrastructure.
Tax Relief and Reform
- Offsets the car tax for working families by allocating funds for a refundable income tax credit for individuals ($150) and joint filers ($300) below income thresholds, impacting approximately 2.4 million Virginians.
- Exempts tipped income from individual income taxes for more than 250,000 Virginians in the food service, personal service, and hospitality industry.
- Makes the existing $8,500/$17,000 standard deduction permanent, avoiding potential tax increases in fiscal 2026 and fiscal 2027.
- Adopts market-based sourcing for multi-state corporations, increases the threshold for estimated income tax payments, and aligns interest on over/underpayments with federal law, saving self-employed individuals money.
K-12 and Higher Education
- Increases funding for direct aid to K-12 in this biennium, resulting in a 54 percent increase over the fiscal 2019-20 biennium.
- Establishes the Virginia Opportunity Scholarship program to allow eligible K-12 students to receive $5,000 per academic year to be used for accredited private school tuition, fees, uniforms, textbooks, transportation, and other costs.
- Allocates one-time and ongoing funding to enhance school performance through the School Performance and Support Framework and the Office of School Quality, delivering targeted assistance for schools identified as needing support to improve student performance.
- Provides funds for an early learning capital supply-building fund to provide competitive grants that help local partners retrofit and renovate existing unused spaces to increase the supply of quality early learning spaces in child care and early learning deserts.
- Invests in additional funds for new innovative Lab Schools established in partnership with Historically Black Colleges and Universities.
- Funds a new student assessment system that will include new definitions of proficiency that will be benchmarked to the highest in the nation.
Economic Development and Workforce
- Expands the Virginia Business Ready Sites Program, further enhancing support of strategic site readiness and infrastructure expansion.
- Funds nursing recruitment and training programs, along with high school dual enrollment and career and technical education.
Health Care and Mental Health
- Fully funds the official Medicaid, Children’s Services Act, and associated rate forecasts for the biennium.
- Increases funding for the Right Help, Right Now initiatives including Special Conservators of the Peace to reduce the burden on law enforcement responding to emergency custody and temporary detention orders; school-based mental health services; 1115 Serious Mental Illness waiver; mental health literacy among youth; and the Adult Psychiatric Access Line.
- Expands support for maternal health including funding for perinatal health hub pilot programs, additional support for doulas and community health workers, and increased payments for psychiatric and ob-gyn graduate medical residencies.
Other Priorities
- Creates a new Disaster Assistance Fund to assist with relief efforts and assist families with housing and other critical needs beyond what FEMA and other federal resources, insurance, and private donations cover.
- Adds funds to the Military Survivors and Dependents Education Program, combining general funds with the actuarial surplus amounts of the Defined Benefit 529 programs.
- Requires law enforcement and jail officials to fully comply with Immigration Customs and Enforcement (ICE) detainers and prohibits “sanctuary city” practices, which could result in the loss of state funding to the locality.
- Provides funds for wastewater treatment plants and water quality improvement projects.
- Allocates funds across state agencies to modernize legacy IT systems.
- Makes a $295 million deposit into financial reserves.