(HB1600)

GOVERNOR'S VETO

I approve of the general purpose of this bill, but I am returning it without my signature with eight item vetoes and with the request that the attached amendments be adopted.

Together, the 205 amendments and eight item vetoes I am offering to the 515 amendments to Chapter 2 of the Acts of Assembly (2024 Special Session I) preserve the vast majority of spending priorities as passed by the General Assembly.

Once adopted, the changes to our current biennial budget will ensure that all our obligations, including Medicaid, are fully funded, and that significant new resources are dedicated to our shared priorities. This budget will deliver an additional $1 billion in tax relief to Virginians this year as well as bring us to a total of $5 billion into Virginia's “rainy day” funds, including a discretionary deposit of $300 million over the biennium into the Revenue Reserve Fund made by my amendments.

My amendments bring the changes made by the HB 1600 conference report in line with the prudent approach to budgeting and strong commitment to the long-term structural balance of the Commonwealth's finances that has served our shared constituents well and maintained the sterling AAA bond rating we have earned from all three rating agencies.

The reality is Virginia has never been stronger. Strong job growth. Strong growth in startups. Strong business investment. Strong population growth.

And that strength allows us to achieve three key objectives First, to provide needed additional $1 billion in tax relief, bringing us to $9 billion over our time together.

Second, to provide incremental funding for key shared priorities on top of the record investments in the Common Ground budget, but not to overwhelm Fiscal Years 2027 and 2028 with ongoing spending obligations.

And third, while I am confident in our projections, we should create even more reserve cushion as we recognize that the moves to restore fiscal sanity in Washington are needed, and such moves can cause near-term uncertainty.

We are strong. Because of that strength we can be dynamic. And, by being dynamic, we will continue winning together.

A Strong Balance Sheet for Virginia and Significant Investments in Virginians

Virginia remains in a strong financial position, with state revenue running slightly ahead of plan through 8 months of Fiscal Year 2025. Virginia's strong job growth and significant investment commitments from businesses are driving revenue growth year-over-year, resulting in a projected surplus versus the adopted budget for the fourth consecutive year.

With the highest labor force in Virginia's history, two consecutive years of high net in-migration for the first time in a decade, and with more job growth as a percentage of our workforce than the vast majority of other states in the last three years, we are confident that revenues will remain strong even when viewed conservatively.

We continue to have confidence in our Fiscal Years 2025 and 2026 forecast, although we acknowledge a broadening aperture of the risk window. The establishment of a select Emergency Committee on the Impacts of Federal Workforce and Funding Reductions in the House of Delegates and a Senate Finance and Appropriations Committee Special Subcommittee on Federal Impacts to Resources is a clear indication of your concerns. As such, amendments are justified to ensure that Virginia's finances remain well positioned to address any unforeseen reductions in general fund revenues over the biennium.

Our reserve fund balances are among the best of any state in the nation. With the total of $594.5 million deposited into the Revenue Reserve Fund in this budget package, we will have approximately $5 billion in reserve funds representing 17 percent of our annual general fund spending. Revenue collections are running ahead of the revenue forecast by one percent, or $187.2 million, year to date.

While I firmly believe car tax relief is the most critical tax relief and differs from your budget amendment, it is clear that Virginia can fund priorities and maintain our long-term structural balance while delivering the $1.1 billion in tax relief offered in this budget, as well as the investments in Virginians outlined below.

Education

These amendments include $166 million more for public education than the amendments I introduced in December. This includes:

· $84.7 million to raise the cap on non-instructional support positions to 25.5 per 1,000 students;

· $52.8 million for enhanced special education;

· $25 million for Virginia Opportunity Scholarships;

· $25.8 million to maintain our assessment system while the new one is competed;

· $25 million in increased support for the schools identified as “Off-Track” or “Needs Intensive Support” under the School Performance and Support Framework adopted by the Board of Education, and,

· $15 million for College Partnership Laboratory Schools.

This budget includes a bonus for teachers as well as all state and state-supported local employees. This builds on the 18 percent teacher pay raises adopted over the last three years of my Administration.

Virginia's best-in-class Early Childhood Care and Education program, Building Blocks for Virginia Families, is supported in my budget by common sense reforms proposed by the Early Childhood Care and Education Commission, with a slight increase of up to 7 percent in co-pay for participating families in line with federal standards and an ongoing increase of $7.5 million in new general fund on top of the $593 million in total funding in the base. This means we are able to reduce our birth-to-five child care waitlist by 7,000 slots, providing high-quality child care to more than 52,000 children across Virginia in FY26, supporting hardworking mothers and fathers. This budget would create the largest number of publicly funded early childhood slots in Virginia history.

After years of widespread concern about increased general fund support for higher education, this budget builds on the $1 billion investment in Chapter 2 in our colleges and universities, offering $55 million on top of $150 million in the base for affordable access, $15 million more for financial aid on top of the $33 million already in the base, and $15 million for critical information technology infrastructure. With this support, my amendments cap tuition increases at 2.5 percent or inflation.

In addition to these university supports, my amendments direct $60 million in nongeneral funds from the actuarial surplus in the defined benefit portion of the Commonwealth Savers Plan (formerly Virginia 529) to fund tuition waivers offered under the Virginia Military Survivors and Dependent Education Program.

Prior to Chapter 2, the cost of these waivers was fully socialized by each individual public college or university, which led to significant concerns about the sustainability of the program and its impact on affordability for all students. We came together last year to address those concerns with additional funding for the first time. Multiple working groups were formed across the executive and legislative branches to discuss the sustainability of the program. At each of those meetings, our military heroes and their families made themselves heard.

It is clear this program is a critical component of the mission we all share to make Virginia the best state in the nation for veterans and their survivors to live, work, and raise a family. The use of the actuarial surplus in a now closed portion of the Commonwealth Savers Plan to support these students and the universities that educate them is a commonsense solution to keep our promise to our military heroes and keep tuition affordable for all other students.

My budget also makes significant capital investments at our universities, a total more than $820 million over Chapter 2, including funding for the performing arts center at the University of Virginia, and restored funding for the Virginia Military Institute Center for Leadership and Ethics.

Health and Human Resources

This budget provides and additional $824.5 million for Health and Human Resources over the biennium. It meets and clears a significant hurdle by fully funding the Medicaid and SCHIP forecast increase with $720.5 million in general fund, bringing us to a total of $16 billion in general fund and $53 billion in general and nongeneral fund support to those Virginians most in need.

The budget also provides for $105.43 million for the Children's Services Act caseload and cost increases, $1.7 million for pharmacies in hard to serve rural areas, and $15 million for drinking water grants at the Virginia Department of Health (VDH).

The budget includes $1.1 million to increase Medicaid rates for substance use disorder services to 6.5 percent, but removes most proposed rate increases for expansion of Medicaid services to ensure adequate revenue reserves.

My amendments improve on the maternal health supports included in my introduced budget and the conference report by moving the maternal health mobile hub funding from VDH to the Department of Medical Assistance Services, setting up a future where our managed care providers fund these supports as a part of their contract, and restores funding for doula services at local health departments.

Finally, my amendments include a one-time infusion of $1.5 million in general fund to the Department of Social Service to support security enhancements for Supplemental Nutrition Assistance Program (SNAP) Electronic Benefits Transfer (EBT) cards.

Public Safety

When adopted, my amendments will bring all-in funding for public safety to $41 million more than Chapter 2, for a total of $5.3 billion over the biennium.

My budget directs $50 million for disaster response and relief to Southwest Virginia, not only in the devastating wake of Hurricane Helene, but also more recent flooding events.

My amendments allow a portion of the funding to be used by local governments to cover any required federal match and authorizes up to $2.5 million to be utilized for much-needed improvements to public safety communications infrastructure.

They also restore $5.3 million on top of our record spending for School Resource Officer (SROs) incentive grants, bringing funding to almost $50 million in this biennium, and over $100 million when you include the last biennium.

With this additional funding, and the reforms we have worked on together to improve the efficacy of the program, we remain well on our way to achieve the important goal of an SRO or School Security Office (SSO) active on every school campus in the Commonwealth.

My amendments also restore an important condition on state funding for our localities, requiring cooperation with lawful U.S. Immigrations and Customs Enforcement (ICE) detainers. This is not a partisan issue. Enhanced cooperation with ICE and other federal partners is a critical step to keeping our communities safe.

Local governments or local and regional jails that adopt policies or engage in practices that prohibit cooperation with ICE weaken our ability to protect Virginians from violent crime.

This budget also provides an additional $2 million for reimbursement of local law enforcement transportation of individuals emergency custody or temporary detention orders and expands funding for Special Conservators of the Peace (SCOPs) at private hospitals by $4 million in order to get law enforcement out of the business of waiting in emergency rooms with behavioral health patients in crisis and back on the streets.

Investments in Commerce and Trade and Natural and Historic Resources

This budget adds $20 million and establishes a base annual funding of $40 million for the highly successful Virginia Business Ready Sites Fund and provides $7.5 million for utility infrastructure investments at a key site in Pulaski County, as well as $6.5 million for a key site on the Eastern Shore.

This budget provides $8 million in dredging at Wallops Island to support Virginia's commercial space industry, retains $8 million to support transformative energy and power investments through the Clean Energy Innovation Bank, and restores a $20 million line of credit to support runway expansion at the Roanoke-Blacksburg Regional Airport.

My amendment retains the transfer of $6 million for the Virginia Talent Opportunity Program from the State Council for Higher Education of Virginia but realigns this program within the Department of Workforce Advancement and Development (Virginia Works) which, in close collaboration with the Virginia Economic Development Partnership, will market and disburse incentives to private companies that offer high-quality internships. My amendments also include $480,000 for the Virginia Has Jobs initiative to further our efforts to match job seekers with the over 250,000 open positions we have in the Commonwealth.

My amendments include $50 million in additional nongeneral funds added to the Community Flood Preparedness Fund, bringing to a total of $150 million in the biennium and $477.8 million over the life of the fund. Portions of the fund are earmarked to cover critical water infrastructure projects in several localities. My amendments provide an additional $50 million for the City of Richmond Combined Sewer Overflow project, bringing state funding offered to our capitol city for this vital effort to $318 million.

In addition, after careful consideration and a site visit with the local Delegate and community leaders, my budget includes language to authorize the consideration of establishing Oak Hill, the historic home of Virginia Governor and fifth President of the United States of America James Monroe, as a state park. Similarly, in support of the celebration of the 250th anniversary of America's founding, the budget authorizes $5 million for a Colonial Williamsburg Transit Center improvement project and $8 million for flood protection measures at Jamestown.

Reforming Gaming in the Commonwealth

My amendments restore the bipartisan priority of the creation of a Virginia Gaming Commission that was originally included in the House of Delegates passed version of HB 1600. Given the rapid expansion of gaming in the Commonwealth this decade, it is imperative that we establish consolidated, coordinated oversight.

My amendments preserve much of the changes made to the equitable distribution of proceeds from Historical Horse Racing (HHR) but reduces the tax rate on those machines to 1.3 percent in order to continue to encourage investment in the Commonwealth.

Likewise, as outlined in detail below, I am vetoing the inclusion of an anti-business provision requiring an additional public referendum on an already approved HHR facility in Henrico County.

Attached to this letter are my proposed amendments to HB 1600 and my item vetoes are explained in line below.

Item Vetoes

My reason for each of the eight item vetoes are set out below.

Revocation of Appropriations for the Joint Subcommittee on Elementary and Secondary Education Funding (Item 1.S.5.)

I am vetoing this Item because the General Assembly has sufficient staffing and cash balances in its current appropriation to support the procurement of additional technical support to the Joint Subcommittee on Elementary and Secondary Education.

Prohibition on Procurement of Student-Weighted Funding Formula Modeling (Item 44.H.)

I am vetoing this Item as an infringement of my Executive power to procure goods and services that are determined to be in the public interest.

DHCD Manufactured Home Acquisition Program Appropriation (Item 102.M.)

I am vetoing this Item because I disagree with the intent and public purpose of efforts to purchase assets of private businesses using public dollars generated through electricity taxes and statutorily dedicated to weatherization assistance programs.

DHCD Mortgage Assistance Appropriation (Item 102.N.)

I am vetoing this Item because I disagree with the intent and public purpose of efforts to use taxpayer dollars generated through electricity taxes and statutorily dedicated to weatherization assistance programs for new programs that are largely duplicative of existing public programs.

CASA Welcome Centers (Item 331.DD.)

I am vetoing this Item because I disagree with the intent and public purpose of providing tax-payer support to nonprofit advocacy organizations.

Bond Authorization in Capital Outlay for Water (Item C-53.50)

I am vetoing this Item given the articulated concerns of General Assembly leadership regarding the uncertainty of current general fund forecasts. Accordingly, Virginia does not need to authorize additional debt during this biennium.

Bond Authorization in Capital Outlay for SLAF (Item C-53.80)

Henrico Historical Horse Racing Referendum (Enactment 8)

I am vetoing this Item because it would require an additional referendum to authorize currently legal parimutuel wagering in Henrico County. Additionally, this action impairs currently valid contracts of an existing Virginia business conducting lawful business activities in the Commonwealth.

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In your review of these proposals, I think you will find they are consistent with the primary objectives that we all have worked toward this year. I respectfully request your adoption of these amendments so that they may be incorporated into the Appropriation Act for the upcoming biennium.