Executive Corner

This week, Governor Youngkin ceremonially signed the state budget. The budget includes $165 billion in appropriations over two years, with significant investments in items of interest to the business community -- additional funding for site development to attract new businesses and jobs to Virginia, K-12 and higher education, increased funding for mental health services and supports, law enforcement, and funding to widen I-64 between Hampton Roads and Richmond. In addition to new funding, there is almost $4 billion in tax cuts, including the elimination of the state share of the grocery tax (the local share option remains intact), a phased reduction on the tax on military pensions, and the refunding of a portion of the Earned Income Tax Credit for low-income working individuals. For a specific list of budget items of interest to the business community. The new budget goes into effect on July 1, 2022. VA State Budget was released VA State Budget Summary The following is a summary of budget items of interest to the VA business community. Economic Development Provides $130 million to fund all remaining applications for the Rebuild Virginia program, which provides direct assistance to small businesses impacted by the COVID-19 pandemic Invests $109 million over the biennium in the Virginia Business Ready Sites program, with an additional $50 million in FY 2023 if revenue collected in FY 2022 exceeds revenue estimates Provides $66.7 million for statewide investments in Virginia’s emerging pharmaceutical manufacturing, biotechnology, and life sciences clusters across the Commonwealth Includes $9 million over the biennium for the Governor’s Motion Picture Opportunity Fund Creates the Virginia Minority Business Commission, which will promote the growth and competitiveness of Virginia minority-owned businesses Establishes an inter-agency task force to make recommendations to support economic development in Southwest Virginia Allocates $2.5 million in FY 2023 to create a supply chain for the offshore wind industry Provides an additional $7 million over the biennium to implement the Virginia International Trade Plan Directs VEDP to assess the feasibility of establishing an inland port in Region 2000, the Mount Rogers Planning District Commission, or the City of Bristol and submit its findings to the General Assembly no later than November 1, 2022 Directs VEDP to undertake a study of strategies to attract skilled out-of-state talent to fill maritime jobs in Hampton Roads in support of the shipbuilding, ship repair, and offshore wind industries; report due by November 1, 2022 Education Public Education Provides the Commonwealth’s largest K-12 budget, $19.2 billion over the biennium Includes $66.9 million to implement several early childhood education initiatives, including biennial rebenchmarking for Virginia Preschool Initiative (VPI) slots, expanded services for three-year-old, expanded mixed delivery and early childhood workforce recruitment and retention grants Provides for a 5% teacher raise and $10 million for teacher recruitment incentives Allots $62.5 million for reading specialists Includes $395 million for rebenchmarking. Addresses school construction by Allocating $450 million for school construction assistance grants. Providing $400 million in formula-based school construction and modernization grants Authorizing up to $200 million each year from the Literary Fund to be used for school construction loans Provides $9.4 million to implement the Virginia Literacy Act Includes $100 million for planning and startup grants and ongoing operational aid for College Partnership Laboratory Schools Higher Education Provides additional support for public colleges and universities by approximately $614 million, funding to address affordability and access Provides HBCUs $90 million to address access costs, provide scholarships, and program support Workforce Development Includes $13 million to expand student internships and other work-based learning experiences in collaboration with Virginia employers Designates $8 million to G3 innovation grants Creates a Health Workforce Development advisor position that will develop recommendations on how to make Virginia's health workforce the best it can be to maximize the health status of Virginians and the quality of health care provided to Virginians Provides an additional $3.2 million over FY 2022 base for the Virginia Talent Accelerator Program Allocates $2.5 million for the Advanced Manufacturing Talent Investment Program Environment Deposits $313 million in the Water Quality Improvement Fund in FY 2023 Provides $10.7 million over the biennium for State Parks Increases base support for the Virginia Land Conservation Fund from $10 million to $16 million per year Delays phaseout of plastic foam food containers (polystyrene) for large restaurants from 2023 to 2028 and all other restaurants from 2025 to 2030 Housing Includes $40 million in additional deposits to the Virginia Housing Trust Fund to support the creation or preservation of affordable housing, bringing the total to $150 million over the biennium Authorizes Virginia Housing to issue $240 million in Virginia Housing Opportunity Tax credits, bringing the total cost of the program to $255 million over 10 years Establishes a stakeholder workgroup to develop model guidelines for a program to provide rental assistance to low-income renters Tax Eliminates the Accelerated Sales Tax requirement, which required Virginia businesses to pre-pay their sales tax in June Increases the standard deduction from $4,500 for individuals and $9,000 for joint filers to $8,000 and $16,000, effective tax year 2022 Provides a one-time tax rebate of $250 for single taxpayers and $500 for married taxpayers filing a joint return; rebates are issued in FY 2023 Eliminates the state sales tax (1.5%) on groceries and essential personal hygiene products, effective January 1, 2023 (it still retains the 1% grocery tax option for local governments) Allows for a four-year phase-in of income tax subtraction up to $40,000 for military retirees aged 55 or older; $10,000 in tax year 2022, $20,000 in tax year 2023, $30,000 in tax year 2023, and $40,000 in tax year 2025 Increases the Virginia individual and corporate income tax deduction for business interest from 20% to 30% Provides for a refundable earned income tax credit of 15% of the federal level Transportation To widen 29 miles of I-64 between Richmond and Williamsburg, budget allocates $210 million for the project for FY 2022 and another $110 million in FY 2024; and if revenue collected in FY 2022 exceeds revenue estimates, then $150 million or a portion thereof will be added to this transportation project Includes $1 billion in capital investments for the Port of Virginia Allocates $10 million for shallow water dredging projects Provides $30 million for improvements to the Mid-Atlantic Regional Spaceport Unemployment Insurance Includes language that would continue to hold employer Unemployment Insurance (UI) tax rates harmless from pandemic related claims Eliminates the “fund builder” component of the unemployment insurance tax for all employers starting in calendar year 2023 with an administrative deposit of $180 million from remaining balances in the federal Coronavirus Relief Funds to the UI Trust Fund Source: VA Chamber of Commerce