On May 11, 2024, the Virginia General Assembly and Gov. Glenn Youngkin released their long-awaited compromise budget conference report. After months of tumultuous back and forth, sparing commentary, and press tours, the two branches of government reached the infamously called “peace in the valley.” The House and Senate voted to pass the budget on May 13, during a special session, with the governor signing it a few hours later.

The new budget bill mirrors much of the original conference budget, with a few key changes. Spending will stay similar to the March version; however, Youngkin convinced the Democrat-controlled House and Senate to hold off on new tax increases.

Democrats held strong on some of their key initiatives, including increased spending on K-12 education and teacher pay raises. One of the largest investments is over $800 million into the new Early Childhood Care and Education Fund, which will combine the Child Care Subsidy Program, Mixed Delivery Grants, and Virginia Preschool Initiative. Bringing all three into one pot of money will allow The Department of Education more flexibility to fund the programs Virginians are using most.

The agreement provides more than $300 million in additional funds for, among other things, operating support over the biennium to increase access, affordability degree production, as well as the state share of a one-time 3% salary increase for state-funded positions at public colleges and universities. The budget includes $26.5 million for the Innovative Internship Fund Program, which connects businesses with undergrad students to offer them real, paid work experience while still in school. Conferees earmarked $24 million for the Bioscience Research Initiative to help ensure the state’s universities are staying at the forefront of technology and innovation. Additional funds to help offset the higher education institutions’ costs associated with tuition waiver programs are also included. Finally, the budget agreement includes funds to support an increase in the Tuition Assistance Grant program from $5,000 per student to $5,125 the first year and $5,250 the second year.

In anticipation of higher than expected enrollment, the conference report includes $150 million in reserves for Medicaid. There is additional money earmarked for an outside consultant to evaluate the determination/redetermination process and provide a report to the General Assembly on how to best proceed in making the process more efficient. The budget includes increased funding for nursing home facilities meeting specific metrics, as well as investments to fully fund Medicaid and children’s health insurance.

Two big victories for Youngkin were what members agreed not to legislate in the budget. First, they removed language that would require Virginia to rejoin the Regional Greenhouse Gas Initiative, a key issue for conservative supporters. The compromise is without new taxes and removes language from the original budget that would create a new digital sales tax. This tax extended the sales tax to a variety of software and IT services used by Virginia businesses. Conferees did include language to create a Joint Committee on Tax Policy, covering everything from policy around credits and deductions, to equitable income tax brackets, to exploring efforts to modernize the Commonwealth’s income and sales and use taxes. The report instructs the committee to consider the application of sales tax to digital goods.

Secondly, a bill permitting skill games to continue operating in the Commonwealth was not included in the final budget report. While conferees chose to not legislate the bill directly, they used budget language to leave the door open for the state to disperse funds for the administration, regulation, enforcement, and oversight of skill games, should a bill be passed in a subsequent special session. The resolution included language allowing for a special session for the consideration of revenue bills, which would include skill games legislation.

One political development stems from weeks of protest on college campuses, including some particularly heated interactions that resulted in the involvement of Virginia State Police. Speaker Don Scott announced the creation of a bipartisan select study committee on campus safety and free speech, and appointed the following: Delegates Charniele Herring and Terry Kilgore as chair and vice-chair, respectively, and Delegates Betsy Carr, Marcus Simon, Sam Rasoul, Amy Laufer , Bonita Anthony, Joshua Thomas, Chris Obenshain, Tony Wilt, Amanda Batten and Jason Ballard.

While the budget itself was the result of much negotiation, the compromise was mostly made possible by the stronger than expected windfall in revenue collections as well as the use of debt to replace the cost of general funds for $500 million in capital projects. This allowed for Virginia’s mandated “balanced budget” without the need for tax policy adjustments.

Ultimately, all sides are walking away with something they can take back to constituents and voters as a “win,” while leaving a lot on the table to haggle over in next year’s caboose budget and statewide elections.