New compromise proposed state budget offers a mixed bag for schools

Today marks the start of the special legislative session when the latest version of the state budget negotiated by appropriation committee leaders in the General Assembly and the governor will be considered. Expected to pass as soon as this afternoon and then proceed to the governor’s desk for signature or veto, the budget has some strong school funding items but has sparked discussion due to significant fiscal shifts, notably the removal of a stable revenue source—the digital sales tax proposed by the governor and included in the original Conference budget passed by the General Assembly on a bipartisan vote.

Today’s budget compromise includes crucial investments retained from the Conference budget passed by the general assembly, including more than $370 million for the At-Risk Add-On benefitting schools in low-income areas that need the most support, a 3% pay raise for school employees in each year of the biennium totaling nearly $550 million, a more than $70 million increase in support for English learner students, and $14 million to offset the reduction in local grocery taxes. 

In place of the digital sales tax, the budget now relies on updated revenue estimates to fund major K-12 education initiatives from the original March budget proposal. However, these tax estimates are less predictable than the planned digital sales tax, and the budget cuts several ongoing revenue sources including skilled games taxation and the Regional Greenhouse Gas Initiative, and takes out nearly half a billion of additional debt for infrastructure projects it initially planned to fund with existing funds. All these actions raise concerns about long-term fiscal stability of our state budget to fund critical K-12 priorities in the future. 

Moreover, the elimination of the digital sales tax has resulted in a loss of $169 million originally earmarked for direct K-12 aid in the March budget proposal, impacting our highest-poverty school divisions the most. The elimination of $94 million of skilled games revenue will also decrease projected funding previously earmarked for schools next year. 

Like with most legislative sessions, there are wins and losses with this budget. Thanks to school funding advocates and organizations, public schools around the state will see hundreds of millions of additional dollars invested in classrooms and supporting students who face the greatest barriers over the next two years. However, much work remains to adequately fund all of our schools to ensure a child’s background and zip code are not the primary determinants of their educational outcomes. 

After likely approval by the General Assembly early this week, the budget will advance to Governor Youngkin’s desk, where like all Virginia governors before him, he is likely to sign it, enacting the new two-year budget starting July 1, 2024, through June 30, 2026.

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