The House Appropriations and Senate Finance and Appropriations Committees met on May 19 and May 20, respectively, with each Committee receiving a briefing on state revenues from Secretary of Finance Stephen E. Cummings, who reiterated the Administration’s confidence in FY 2025 revenues meeting the forecast in the Appropriation Act, but acknowledged that the outlook for FY 2026 is less certain.
State General Fund revenues performed well in April, exceeding projections by 3.3 percent; revenue growth was largely driven by a strong performance in nonwithholding collections, which increased by 21.9 percent in April relative to April 2024. Although withholding collections missed the forecast by 10.6 percent, the Administration believes this variance to be an anomaly resulting from the last day of April falling on a Wednesday, which likely pushed withholding deposits into May. On a fiscal year-to-date basis, withholding collections are 6.3 percent above last year, although collections are lagging the forecast by 0.3 percent, or $46.6 million. Sales tax collections were up 4.2 percent in April (reflecting March sales), which may be attributable to consumers attempting to avoid tariffs by making purchases earlier. On a fiscal year-to-date basis, sales and use tax revenues have grown by 1.7 percent, and are slightly behind the forecast, trailing by 0.1 percent, or $5.7 million. On a fiscal year-to-date basis, overall General Fund revenues are $211.1 million, or 0.8 percent, ahead of forecast. Secretary Cummings pointed out that revenue collections could decline by 4.7 percent through the end of the fiscal year and still meet the revenue forecast.
Secretary Cummings provided an overview of actions underway within the Administration to track and respond to proposals at the federal level that might pose risks to state revenues, including monitoring of weekly withholding collections from federal agencies and the largest federal contractors and tracking federal grants that have been paused or are otherwise under review. He emphasized that Virginia is in a strong position to weather potential economic headwinds, with revenues poised to meet the FY 2025 forecast, strong reserves, and the additional cushion created by the Governor’s May 2 vetoes, paired with the unappropriated balance from the reconvened session – financial strength recently recognized by Moody’s, which reaffirmed Virginia’s AAA bond rating in April. Members of both committees raised concerns that these views may be overly optimistic, citing potential funding reductions and significant cost shifts to the state under consideration at the federal level for future fiscal years, issues under discussion in special committees in both chambers.
The House Appropriations Committee also received a presentation from State Health Commissioner Karen Shelton, who updated the Committee on actions taken at the Virginia Department of Health to address deficiencies in financial management and other shortcomings detailed in JLARC’s November 2024 review of the agency. The meeting concluded with a presentation from the Virginia Early Childhood Foundation on a new data dashboard that tracks early childhood care and education supply and demand.
Deputy Tax Commissioner Kristin Collins briefed the Senate Finance and Appropriations Committee on the Department of Taxation’s replacement of its tax processing and accounting system, Virginia’s conformity to federal income tax law (which is largely paused for 2025 and 2026 in accordance with provisions in the Appropriation Act, to allow the state to respond to tax policy changes at the federal level), and how income is taxed when a worker lives in one state but works in another. Robert Ward, Chief Transformation Officer, updated the Committee on projects undertaken by the Office of Transformation, with a particular focus on the Office of Recovery and Rebuilding and its work to expedite disaster recovery efforts. Other projects underway include improving state parks’ non-general fund revenue generation opportunities and the Reclaiming Childhood initiative.
VACo Contact: Katie Boyle