Governor Takes Final Action on Legislation, Budget

May 9, 2025

On Friday, May 2, Governor Youngkin announced his final actions on legislation that was returned to him from the April 2 reconvened session. At the reconvened session, the General Assembly had rejected the Governor’s amendments, in whole or part, to 91 bills, and rejected 172 of the 205 budget amendments proposed by the Governor, returning these items for final action within a 30-day deadline. For the bills returned to him in this posture, the Governor had the option to sign or veto the legislation, or to take no action and allow the bills to become law without his signature. The Governor signed 53 of the bills that were returned to him, and vetoed 38 bills.

Similarly, the Governor could sign or veto the entire budget bill, or take no action; the Governor also had the option to sign the budget overall and exercise his line-item veto authority to eliminate specific appropriations. The Governor signed the budget with 37 line-item vetoes, as discussed below.

VACo’s 2025 Legislative Summary has been updated to reflect the Governor’s final actions; an updated version is posted at this link (this version is marked as a second edition and members may need to “refresh” the internet browser to display the updated version).

Governor’s Budget Actions

The Governor indicated that his May 2 budget vetoes, when added to the $50 million in balances available over the biennium after actions taken during the reconvened session, would result in a “cushion” of $900.4 million in the event of a decline in revenues as a result of actions taken at the federal level. Although he expressed his belief that the state will meet the revenue forecast incorporated into the budget as introduced in December 2024, he evinced some concern about short-term risks to FY 2026 revenues. The line-item vetoes largely affected capital projects (representing $691.3 million in savings) and certain housing, natural resources, and economic development-related items. The funding for the functional elimination of the K-12 “support cap” remains intact.

Several items of interest to local governments were vetoed:

First-time homebuyer program: This item would have provided $15 million in FY 2025 to establish the First-Time Homebuyer Grant Program, which would award grants of up to $10,000 in costs incurred by eligible homebuyers in purchasing direct ownership in residential real property.
Rental assistance pilot program: This item would have provided $20 million in FY 2025 for a rental assistance pilot program in Planning Districts 8 and 23.
Local housing trust funds: This item would have provided $13 million in FY 2025 for grants to localities or planning district commissions that have established or will establish by December 31, 2025, a local Housing Trust Fund for long-term local investments related to affordable housing ($5 million of this funding was earmarked for Prince William County, $1 million for the City of Emporia, and $250,000 for Tazewell County for remediation of blighted properties in the Town of Richlands).
Urban Public-Private Partnership Redevelopment Fund: This item would have provided $2.5 million in FY 2025 to capitalize the Urban Public-Private Partnership Redevelopment Fund, which is intended to make grants or loans to local governments to assist in assembling, planning, clearing, and remediating sites for redevelopment, and directed the Department of Housing and Community Development to develop criteria and guidelines for the administration of the grant program.
Clean Energy Innovation Bank: These vetoes, unlike other vetoes that eliminate spending items, restore funding for the Bank by undoing actions taken by the General Assembly to eliminate authority and funding for this initiative, as the Governor vetoed the legislation establishing the Bank in 2024.
Tourism marketing: This item would have provided $1.25 million in FY 2025 for a marketing campaign to attract out of state visitors from Black, Indigenous, and Hispanic communities.
Employee Child Care Assistance Pilot Program: This item would have provided $25 million in FY 2025 to establish and operate the Employee Child Care Assistance Pilot Program, which would have provided matching funds to incentivize employers to contribute to the child care costs of their employees.
Alternatives to state hospitalization: This item would have increased support for pilot programs for individuals with dementia or geriatric individuals who may otherwise be admitted to state hospitals by $1 million in FY 2026.
Community Flood Preparedness Fund: This item would have deposited $50 million in FY 2025 to the Virginia Community Flood Preparedness Fund.
Groundwater research: This item would have provided $2.3 million in FY 2025 for groundwater research in the Eastern Groundwater Management Area.
School Resource Officer Incentive Grants: This item would have designated fund balances within the program to be used for digital mapping projects for emergency response and for continuation of previous grants, as well as providing an increase of $30,000 for administration of the Drug Abuse Resistance Education program.
Impacts of highway development: This item would have provided $250,000 in FY 2025 for a study of the impact of the development of the state’s highway system on African American communities.
Impacts of federal policy changes: One item would have required the Department of Taxation to provide estimated fiscal impacts of any changes to federal income tax policy within 30 business days of their enactment and directed the Governor to submit a budget bill within 20 business days of receiving the estimated fiscal impacts if the cumulative projected impact of the federal changes would decrease general fund revenues by more than $100 million in the current or succeeding fiscal year. The second item would have required an estimated fiscal impact to be provided within 30 days of the enactment of federal changes that affect federal grant revenue by at least $100 million in the current or succeeding fiscal year, and directed the Governor to consult with General Assembly leadership about a special session if federal grant reductions resulted in additional state General Fund expenditures being required that exceeded 1 percent of the General Fund operating budget in the current or succeeding fiscal year.

The Governor’s letter to the General Assembly detailing his line-item vetoes may be found at this link.

Governor’s Actions on Bills

At the April 2 reconvened session, the General Assembly rejected the Governor’s amendments to several bills of interest to local governments, returning those bills to the Governor as passed by the legislature for final action. The Governor’s actions on these bills are detailed below:

Data centers: HB 1601 (Thomas)/SB 1449 (Ebbin), as passed by the General Assembly, would have required an applicant for a rezoning, or special use permit, for a data center (defined as a “High Energy Use Facility” or HEUF) to submit a sound study on potential impacts to any housing or schools within 500 feet of its property boundary. The legislation also required a locality, when considering such application, to require the electric utility providing power to the proposed data center, to submit a report on (1) any new or existing electric substations that will be used to serve the HEUF; and (2) the anticipated transmission voltage required to serve the HEUF. The Governor’s April 2 amendments would have removed these mandates; the Governor also proposed a reenactment clause, effectively nullifying the legislation by requiring the General Assembly to adopt it again in 2026 to make it effective.

Governor’s May 2 action: Vetoed.

Tax exemptions for certain organizations: HB 1699 (Askew), as passed by the General Assembly, would have eliminated the recordation tax exemption for the Virginia Division of the United Daughters of the Confederacy and eliminated the real and personal property tax exemption for this group and several other entities. The Governor’s April 2 amendments would have added a reenactment clause to the bill and directed the Department of Taxation to study the impact of exemptions to the state recordation tax on state government revenues and the exemptions to real and personal property tax by classifications set or designations made on or before July 1, 1971, and the impact of such exemptions on local government revenues.

Governor’s May 2 action: Vetoed.

Employer liability: HB 1730 (Delaney) and SB 894 (Perry), as passed by the General Assembly, establish an expansive legal framework for holding employers liable in civil actions involving victims who have been harmed by an employee’s actions. This would create a great burden on public employers, who by the very nature of providing services for the public would be subject to claims and liability related to the acts of employees that they may not be able to foresee or anticipate. The Governor’s April 2 amendments were helpful to localities as employers, as they would have created more feasible standards of employer responsibility for employees’ actions and also narrowed the definition of “vulnerable victim.”