Proposed Budget Highlights
The governor’s proposed “Unleashing Opportunity” biennial budget modernizes the tax code and bolsters investments in job growth, workforce development, behavioral and mental health support, safe communities, and good governance. The proposal also includes the largest education budget in the history of Virginia.
Tax Reform
- Reduces individual income tax rates by 12 percent across all tax brackets (reduces revenues by $1.1 billion in fiscal 2025 and $2.3 billion in fiscal 2026).
- Increases the statewide sales tax rate from 4.3 percent to 5.2 percent (increases revenues by $520.1 million in fiscal 2025 and $1.3 billion in fiscal 2026).
- Expands the sales tax base to include “new economy” products including streaming products and digital downloads (increases revenues by $203.4 million in fiscal 2025 and $510.7 million in fiscal 2026).
- Increases the Earned Income Tax Credit (EITC) from 20 percent to 25 percent of the federal credit (decreases revenues by $29.0 million in fiscal 2026).
- Doubles the dealer discount (decreases revenues by $10.1 million in fiscal 2025 and $25.2 million in fiscal 2026).
- Increases the annual cap on the Education Improvement Scholarships Tax Credits Program (decreases revenues by $5.0 million each year).
Education
- $72.6 million in fiscal 2025 and $87.9 million in fiscal 2026 to rebenchmark the cost of direct aid to public education.
- $53.0 million in fiscal 2025 for a one percent bonus and $122.8 million in fiscal 2026 for a two percent compensation supplement for instructional and support positions.
- $20.0 million in each year to support attainment of industry recognized credentials through creation of the Diploma Plus program.
- $30.5 million in fiscal 2025 and $30.7 million in fiscal 2026 for reading specialists.
- $30.0 million in each year for Lab Schools to help the operating costs of new and innovative schools throughout the commonwealth.
Workforce and Economic Development
- $100.0 million in fiscal 2025 to establish the Virginia Biotechnology, Life Sciences, and Pharmaceutical Manufacturing Network and grow high-wage, high-tech jobs.
- $200.0 million over the biennium for the Virginia Business Ready Sites Fund and $25.0 million in fiscal 2025 for the Virginia Business Ready Sites Acquisition Fund.
- $3.9 million in each year to the community college system to establish regional career placement centers.
- $4.0 million in each year to continue support for the Earn to Learn Nursing Education Acceleration Program.
Health and Human Services
- $175.1 million in fiscal 2025 and $538.9 million in fiscal 2026 to fund Medicaid utilization and inflation.
- $174.3 million in fiscal 2025 and $237.8 million in fiscal 2026 to continue the Child Care Subsidy Program after federal funding expires.
- $25.0 million in fiscal 2025 to establish an early learning capital incentive program.
- $50.0 million in fiscal 2025 and $100.2 million in fiscal 2026 to add developmental disability waiver slots.
- $33.0 million in fiscal 2025 and $2.6 million in fiscal 2026 to fund additional behavioral health crisis services and $10.0 million in fiscal 2025 to fund mobile crisis teams.
- $10.2 million in each year to support student access to mental health services.
Public Safety
- $118.6 million over the biennium in assumed savings from the closure of four correctional facilities.
- $24.5 million in fiscal 2025 and $18.4 million in fiscal 2026 to transition a correctional facility to state management.
- $9.5 million in each year to fund a career progression program for correctional officers.
- $18.0 million in fiscal 2025 to establish a law enforcement recruitment and wellness program.
- $2.4 million in fiscal 2025 and $4.8 million in fiscal 2026 to provide additional funding for the Victim-Witness Grant Program.
Agriculture and Natural Resources
- $138.1 million in fiscal 2025 for the agricultural cost share and nonpoint source pollution programs.
- $100.0 million in fiscal 2025 to increase funding for the Virginia Community Flood Preparedness Fund.
- $25.0 million in fiscal 2025 to provide additional funding for the Resilient Virginia Revolving Loan Fund.
Governance
- $54.2 million in fiscal 2025 and $54.8 million in fiscal 2026 to provide one percent bonus payments to state employees and state-supported local employees.
- Provides $59.6 million in fiscal 2026 for a one percent salary increase for state and state-supported local employees.
- $150.0 million in fiscal 2025 to upgrade, replace and modernize critical technology systems across state agencies.