On Tuesday, Gov. Glenn Youngkin (R-VA) delivered remarks on final state budget actions.
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00:00Well, good afternoon. Thank you all for coming. And I appreciate it. Please sit down. Thank you. Thank you. Thank you. I appreciate everyone gathering for an important final step in what is an incredibly important budget process.
00:17And so today I will be taking action on 91 bills, 91 bills that were returned to my desk by the General Assembly after their April 2nd reconvene session. By far the most complicated and consequential in my mind of these bills is House Bill 1600.
00:37The amendments to chapter two of the 2024 special session acts of assembly where we signed the budget that I affectionately call the common ground budget. It was a landmark budget. It included record spending for key shared critical areas.
00:58And House Bill 1600 updates that two year state budget. I think it's really important that we recognize that in doing this, we will be able to provide tax relief.
01:17Incremental spending in relation to what is a projected $3.2 billion surplus that we, that we, that we established last December.
01:29Now, as I shared last March, as we prepared to turn in my amendments to the conference report, Virginia's financial strength enables us to be dynamic.
01:44That is a critical attribute of where we stand today. Our financial strength gives us the ability to be dynamic.
01:57We understand that as we head into fiscal year 2026, there are short term risks to that projected surplus.
02:11To be clear, I think that there is a real pathway to achieve the 2026 forecast, but we all know that as president Trump rightfully resets trade imbalances and restores fiscal responsibility in DC, there are short term disruptions.
02:37However, there are short term disruptions. However, there are real long term opportunities. And yet, those short term disruptions, I think require us to be responsible and not spend 100% of this forecasted surplus today.
03:01And that is why I'm taking the actions today. And that is why I'm taking the actions today that I am.
03:08Of the 172 items in the amended budget that were returned to my desk unchanged during the reconvene session, I am approving 135 of them as is.
03:25And I will be item vetoing 37 of them.
03:32And by item vetoing 37 of them, we will be retaining $900 million of the projected $3.2 billion surplus as cushion.
03:47And again, not spending 100% of the forecasted surplus in advance of us actually realizing it.
04:00Now, the budget amendments in House Bill 1600 have been built on the same revenue forecast as the one I introduced in December,
04:11which projected this $3.2 billion surplus over both fiscal years 2025 and 2026.
04:22This budget will take $1.3 billion of that surplus and make strategic investments in shared priorities, bringing our total two year general fund budget to $62 billion,
04:43which is nearly 50% more than the pre-pandemic levels of $42 billion.
04:54It's the strength of the Commonwealth of Virginia that has enabled us to provide $9 billion of tax relief during this time period in our administration,
05:08and yet record investments in so many areas.
05:14House Bill 1600, as I sign it today, will fully fund Medicaid and the Children's Services Act,
05:22delivering well over $800 million in incremental investments for direct aid to public education,
05:30which will reach $22.4 billion for the biennium, a 50% plus increase over pre-pandemic levels.
05:41And this budget that I will be signing today will also take a portion of the projected surplus
05:48and deliver approximately $1 billion in tax relief to Virginians, bringing in total the tax relief during our administration, as I said, to $9 billion.
06:03And finally, of course, as I described, the budget I signed today will include 37 item vetoes in line with my authority under Article 5, Section 6 of the Constitution of Virginia,
06:16that will allow us to retain a portion of the projected surplus as a cushion,
06:24a $900 million cushion on a $31.5 billion revenue forecast against any risk to that forecasted surplus.
06:35Again, not spending 100% of it until we actually realize it.
06:41Now, the context of all of this is really important because I am very optimistic in the long-term prospects for the Commonwealth of Virginia.
06:56And I do believe that Virginia continues to win.
07:00Just this week, we saw an enormous contract awarded to Newport New Shipbuilding for the next two Virginia-class attack submarines.
07:13I had the great privilege of attending a groundbreaking in Chesapeake for a $700 million advanced manufacturing project
07:23that is now shovels in the ground and moving forward aggressively.
07:27And the prospects for the Commonwealth of Virginia for economic development continue to be robust.
07:35However, as we know, the President's actions to reset fiscal spending and to reset unbalanced trade relationships
07:46are expected to have some impact in the near-term on not only the Virginia workforce,
07:53but also, therefore, the revenues that we collect.
07:57And therefore, this is prudent, sound budgeting,
08:01putting the Commonwealth in a strong dynamic position to maintain our AAA bond rating,
08:09to adapt to these potential, although not yet realized, risks to the forecast in the short-term,
08:16and be in a position to take advantage of strong growth opportunities that we anticipate in the long-term.
08:24I've said it before and I'll say it again that Virginia's strong financial and economic position
08:31gives us the chance to do these three important things.
08:36Return money to taxpayers.
08:40Increase funding for the priorities that we all share.
08:45And maintain a dynamic position for continued future growth through prudent, responsible financial management.
08:53Now, to understand the importance of this action, I'm going to take everybody on a little journey,
09:01keeping our eyes on both spending and forecasting.
09:07So in December, we projected a $3.2 billion surplus over the existing forecast.
09:16$2.1 billion in fiscal year 2025 and $1.1 billion in 2026.
09:24That projection was based on actual performance and, I think, very responsible forecasting.
09:31And so when I proposed a plan in December to the General Assembly, it included $1.1 billion in tax relief
09:38and $2.1 billion in new investments supported by that surplus.
09:43An amount that was on top of what was already agreed in the common ground budget, which took us to record levels.
09:50By March, the General Assembly had come back with their own budget changes, and it included $1 billion in tax relief.
10:00Different format, but we agreed on that.
10:03And $2.2 billion in new spending supported by the forecasted surplus.
10:11They also made some choices that raised some concerns because they substantially increased ongoing spending into the future biennium.
10:24So during my first bill review period, while we were ahead of forecast for the eight months of fiscal year 2025
10:32and on track to hit our financial forecast, potential short-term risks to the forecast, as we discussed,
10:41I believe required a prudent set of amendments back to establish this cushion against this very, very large surplus.
10:53Virginia is in a stronger position than our neighbors across the river to do exactly this.
11:02Just recently, Moody's reaffirmed our AAA credit rating, due not only to our responsible budgeting,
11:09but also to the reality that while we do expect Virginia federal workforce to be reduced, and I will repeat,
11:18every job lost is a heart-wrenching moment.
11:22You all know my family went through this twice while I was growing up.
11:26And we know that this is a dislocation, not just for those families, but beyond.
11:34But we do have a higher percentage of our workforce that's in the military, the intelligence community, and the national security environment.
11:46And Moody's recognized that as somewhat of a cushion for Virginia.
11:53Meanwhile, as they reaffirmed our strong credit rating, Maryland has been placed on negative credit watch, and as has Washington, D.C.
12:06But as I've said over and over again, these necessary federal reforms will create job dislocation for our federal workers and contractors.
12:18And the responsible thing to do is first to help them find a pathway to the many, many, many jobs that Virginia has open.
12:28Over 225,000 open but unfilled positions to make sure that they get the support that they need between a dislocation in their current job and their next career opportunity.
12:41And to support every aspect of that along the way, but also to recognize that the timing of that transition does create a risk to our financial forecast.
12:53In other words, we need to create a cushion.
12:58We need to hope that the cushion is not used, but we should not spend 100% of our forecasted surplus before it's in the bank.
13:09Now, House and Senate Democrat leadership also recognized these potential risks as both of them launched special committees with the express purpose of understanding them and addressing them.
13:26This is why I was surprised that they rejected so many of my reasonable amendments, which just reduced the level but maintained so many of their introduced amendments.
13:42And as a result, what they sent me committed all of the money in the projected surplus except for $50 million.
13:55In fact, it is that statement that I think requires us to step forward and take the actions today to create this cushion and not spend 100% of this forecasted surplus until we have it.
14:16Now, as of the last revenue report at the end of March, we are $85 million ahead of forecast and we continue to project that we will achieve our fiscal year 2025 forecast.
14:31But it is our obligation to look ahead and be prudent and be responsible for our taxpayer dollars.
14:38And therefore, we need to take some action.
14:42The President's efforts, as I said earlier, to reset trade relationships and restore the fiscal sanity in Washington does create these short-term risks and, yes, will lead to longer-term growth.
14:55But it is indeed the expectation and that of the administration that there is a pathway to success.
15:04I believe that they will negotiate better trade deals and that tariff levels will be reduced.
15:10I think that will open up new markets for Virginia products and it will continue to attract significant business investment to America and to Virginia.
15:23In addition, the efforts to restore fiscal responsibility in D.C. are expected to result in the reduction in federal workforce and contractors.
15:33This is expected to impact Virginia's job level in fiscal year 2026, offset, as I said, by the fact that we have many, many, many open positions in Virginia,
15:45more than $225,000 plus, and we will be protected a bit by increased investment in the military, in national security, and in the intelligence community.
15:59Now, with that in mind, I asked the Virginia Department of Taxation to look at different scenarios of possible outcomes for the impacts of some of these policy changes.
16:10And while this wasn't a formal re-forecast, and many of the Gaker members who we spoke to individually during this period actually expressed a sentiment that if you didn't know what was being projected in the headlines of newspapers,
16:27you would expect that things were pretty good based on current data.
16:31And the scenarios do show that while 2025 revenue will likely stay on track, that if these risks do present themselves, our projected surplus may be reduced.
16:49Again, to be clear, I see a path to meeting the 2026 forecasts.
16:56But in these scenarios, given the fact that we have the law of large numbers working here, if there's a 1% miss, it's $300 million.
17:09If there's a 3% miss, it's $900 million.
17:14These are large numbers, and yet in the context of a $31.5 billion revenue forecast, give us little room if we spend it all.
17:29I do believe that providing a cushion of up to 3% against the forecasted surplus and not spending 100% of it before we have it is prudent.
17:44Now, the wrong path would be for us to appropriate it all and then for these risks to potentially materialize.
17:57That would result in having to reduce spending, or worse yet, raise taxes, neither of which is a good outcome.
18:09Of course, that step is constitutionally or statutorily in my authority to cut up to 15% of spending across the board if we're behind in our financial forecast.
18:22And I believe that is absolutely the wrong way to go for the Commonwealth of Virginia.
18:29Both of the options of cutting existing spending, or raising taxes, I believe are irresponsible, and will lead to considerable uncertainty, could damage our credit rating, and make it harder for state and local agencies to deliver services.
18:49So let me repeat what I've said.
18:52Because we take our collective financial responsibility to the taxpayers very, very strongly, I just want to be clear.
19:04We are creating cushion against a forecasted surplus.
19:09And yet, we are investing an extraordinary amount more than the base chapter 2 budget, the common ground budget, and we are able to provide a billion dollars of tax relief.
19:22Now, of the 900 million of cushion that we are creating against this forecasted surplus, about 691 million of it comes from one-time capital projects that were being appropriated in fiscal year 2025.
19:41The vast majority of these projects are for public colleges and universities.
19:48All of them, there's 10, are in the process of planning.
19:56And none of them are in construction.
20:01And in fact, nine of the 10 are still in preliminary planning or mid-level planning.
20:11And to be honest, my assessment of digging into each one of these individual projects is that this action today will not impair the timing of their planned construction.
20:26And in fact, there's work to be done before they could even get there.
20:31There is a substantial number, 3.2 billion dollars, of higher ed capital projects already underway.
20:42And only 500 million of that appropriated amount has actually been drawn down.
20:48Leaving a substantial amount of money yet to be deployed in already appropriated projects.
20:57I do think that it would be prudent for us not to pile on another 670 odd million dollars into the appropriated but not needed funding balances today.
21:11I also want to be perfectly clear that these projects are good projects.
21:17They should be funded.
21:19And we are providing the General Assembly the opportunity in January to pick them back up.
21:25And they will be able to use either cash resources or bonding in order to make sure that these projects continue on their current timeline.
21:36In close, let me be perfectly clear.
21:39This budget today delivers incredibly important results for Virginians.
21:46Of the forecasted surplus, there's a billion dollars of tax relief.
21:50There's 900 million of the surplus that we're just retaining as a temporary cushion to keep Virginia in its incredibly strong financial position.
22:01And that leaves 1.3 billion dollars of the forecasted surplus coupled with 2.9 billion dollars that we are carrying over from the previous biennium to support record investment levels in our most important shared priorities and sacred commitments.
22:20For health care, this budget provides 825.9 million dollars, over 686 million for Medicaid, 100 million for the Children's Services Act, 25 million for drinking water infrastructure, and over 12 million dollars in investments in maternal health.
22:45For K through 12 public education, there's 834 million dollars in investments in public education.
23:02Nearly 223 million dollars, nearly 223 million to lift the support caps, nearly 111 million for English language learners, 7.5 million to reduce the childcare waitlist by 7,000 slots, nearly 53 million dollars more for special education, and an additional 134 million dollars to fund much deserved bonuses for our teachers.
23:29For higher ed, building on the 1 billion dollars of investment in Chapter 2, with an additional 235 million over the biennium.
23:49For natural resources, $50 million for natural resources, $50 million for disaster response and relief in Southwest Virginia, $50 million in non-general funds for the community flood protection, and $50 million for the Richmond combined sewer operation.
24:04Friends, thank you for going on this journey with me.
24:11I want everyone to fully appreciate the fact that Virginia is strong.
24:16Virginia is dynamic, and it is that strength that enables us to do exactly what we're talking about today.
24:24To substantially increase investment in these most important priorities.
24:30to provide a billion dollars of tax relief for Virginians on top of the 8 billion that has already been in motion during our administration.
24:40But also, to recognize that prudent budgeting requires us to not spend all of our forecasted reserve until we have realized it.
24:53We are America's top state for business.
24:57We have over a hundred billion dollars in capital investment for new and expanding businesses already committed.
25:04There's over 267,000 more Virginians working today than when we started.
25:09And that hundred plus billion dollars of capital commitment underpins another 70,000 jobs that will materialize in the future.
25:18We've broken through our goal for 10,000 startups, and now we're at 15,000 high-growth startups in the Commonwealth of Virginia.
25:27We stand here with record levels of rainy day reserves.
25:31And yes, nine billion dollars in tax relief.
25:35Record-setting education investment.
25:37Just this week, the announcement that we've had a 44% year-over-year drop in fentanyl deaths to lead the nation in reducing overdose deaths.
25:47Our streets are safer.
25:59We have the healthiest Chesapeake Bay in over two decades.
26:04And a port that is the envy of not only the nation, but the world.
26:09And maybe most importantly, once again, we are a growing state with more people moving to Virginia than to the other 49 states for the first time in over a decade.
26:23We are strong.
26:25We are dynamic.
26:27And we are winning together.
26:29And I am honored and humbled that the people of Virginia hired me to the best job in the world to work with so many extraordinary people on behalf of 8.8 million bosses to unleash opportunity and prosperity in this great Commonwealth of Virginia.
26:51And so thank you very much.
26:53May God bless you and may continue to bless our great Commonwealth.