Youngkin, Va. lawmakers agree to seek new state budget, avert crisis

Youngkin (R) met with Democratic and Republican leaders of the General Assembly on Tuesday afternoon and Wednesday morning ahead of a reconvened session of the legislature to find a procedural way out from a budget impasse over taxes and spending priorities, according to Scott and the two others, who spoke on the condition of anonymity to share private negotiations.

With Democrats who control both chambers of the legislature expressing no interest in Youngkin’s plan to drastically rewrite the budget they passed March 9, it seemed as though the state was careening toward a showdown in which Youngkin would exercise a Virginia governor’s first veto of the entire budget.

That, in turn, would leave Virginia facing a possible — and unprecedented — shutdown of state government if no budget compromise was reached by the end of the current fiscal year on June 30.

Wednesday morning’s deal finds both lawmakers and the governor united around the idea of avoiding that breakdown in governance, which threatened to shake up Virginia’s coveted AAA bond rating and undermine the state’s reputation for sound fiscal management.

According to Scott, Youngkin and a bipartisan group of leaders from both the House of Delegates and state Senate met in the General Assembly Building and agreed to find a way out. Under the terms of that agreement, the House of Delegates voted unanimously Wednesday afternoon to reject all of Youngkin’s 233 proposed amendments to the budget and then procedurally killed the underlying document.

But while that would seem to leave the state in even worse limbo, lawmakers and the governor have agreed to work to fashion a new two-year spending plan based on the General Assembly’s budget, but with an acknowledgment of Youngkin’s opposition to a proposal to extend the state’s sales tax to digital goods and to apply the new tax to businesses as well as consumers.

There is no agreement to permanently scrap that plan, Scott and others said, but an understanding that some kind of compromise will have to take place. Youngkin himself originally proposed the tax change, but it was in concert with other tax cuts that the legislature rejected. Youngkin’s administration also announced Tuesday that the state is running a surplus of roughly $1 billion, offering a potential funding source for legislative priorities such as teacher raises and higher education.

Youngkin and General Assembly leaders have agreed to hold a special legislative session, probably in mid-May, to wrap up the budget process well before the June 30 deadline.

Delegates alluded to the pending deal in early speeches on the House floor Wednesday, referring to “détente” and a cooling of the temperature.

“Hopefully we may have entered into a phase where finally we can all sit down and the governor and the leaders of the budget committees and you, Mr. Speaker, can work this out,” House Minority Leader Todd Gilbert (R-Shenandoah) said.

In a Wednesday morning interview that was embargoed until the action took place, Scott said the breakthrough began unfolding quickly Tuesday afternoon, as he and staffers were preparing for a long day or two of angry speeches from delegates hashing out aspects of the budget.

Youngkin, with whom Scott has developed an unlikely friendship since becoming speaker early this year, sent him a text about taking one last crack at conferring. Other House leaders called and texted, as they, too, made contact with Youngkin. A meeting was arranged, and Youngkin came over to the House Appropriations Committee offices on the 12th floor of the General Assembly Building.

Joining Scott and the governor were Del. Luke Torian (D-Prince William), chairman of the Appropriations Committee, as well as Gilbert and budget negotiator Del. Terry Austin (R-Botetourt). From the Senate side, Finance and Appropriations Chairwoman L. Louise Lucas (D-Portsmouth) attended, along with Democratic caucus leader Mamie Locke (Hampton) and Senate Minority Leader Ryan McDougle (R-Hanover).

Scott described a late-breaking sense of clarity on all sides, a realization that steaming toward a budget veto from the governor and possible government shutdown would hurt all of their constituents. New York bond rating agencies had told him the state’s lofty status was at risk, he said, which would mean higher borrowing costs for state government, passed along to taxpayers.

During the meeting with Youngkin, he said, the dilemma was clear: use Wednesday’s session for “performances” of partisan political speeches, and then produce a budget that Youngkin was all but certain to veto? “Or do we use this day to take the temperature down and try to be constructive and do a reset?” said Scott, who just Tuesday released a digital ad criticizing “Pretending Glenn” for his budget changes.

“We decided that we needed to take the temperature down a little bit,” Scott said.

This story is developing and will be updated.