Secretary of Finance Mark Sickles briefed members of the Senate Finance and Appropriations Committee on Tuesday, shortly after the Monday night release of Governor Spanberger’s amendments to legislation passed by the 2026 General Assembly.
Secretary Sickles reported that state General Fund revenues are outperforming expectations, running $708.5 million, or 3.2 percent, ahead of the forecast. Secretary Sickles expressed confidence in the state’s finances in the near term, noting that revenues could decline by 4.1 percent in the last quarter of the fiscal year and still meet the FY 2026 forecast. However, he cautioned Committee members that individual income tax non-withholding and lower than expected individual income tax refunds represented $582.2 million of the $708.5 million variance from the forecast – in other words, most of the growth was generated by sources that have traditionally been volatile. He highlighted several concerning economic indicators, including a loss of 31,600 jobs in Virginia since the beginning of the fiscal year, an increase in the state unemployment rate, and a decline in labor force participation. A sustained increase in oil prices is a potential inflationary factor, with every $10 increase in the price of oil translating to a 25-cent-per-gallon increase in gasoline prices.
Members pressed Secretary Sickles on the Governor’s openness to additional revenue options to bridge the $1 billion difference between the House and Senate spending proposals. The Senate proposes to sunset the sales and use tax exemption for data center equipment and software in January 2027, ahead of its scheduled expiration in 2035, while the House proposes to require data centers to meet certain environmental standards to qualify for the exemption, but does not assume additional revenues from data centers in the upcoming biennium. Several members expressed frustration at the Governor’s veto of legislation that would have established a regulatory and tax structure for skill games, noting that this action eliminated potential revenues that could have been used to fund legislative priorities. Secretary Sickles responded by encouraging conferees to meet to begin finding a solution to the impasse. Legislators will return to Richmond next week to consider the Governor’s vetoes and amendments at the April 22 reconvened session, followed by the April 23 convening of the special session that has been scheduled to finalize a new biennium budget.
Secretary Sickles’s presentation is available at this link.
VACo Contact: Katie Boyle