Virginia Viewpoint: From Surplus to Safety Net

From Surplus to Safety Net

With his signature, Governor Youngkin officially wrapped up the legislative work of the 2025 Regular Session.

On May 2, the Governor signed the state budget that will fund the remainder of the biennium through June 30, 2026. This marks the first time in eight years the legislature completed its work without requiring a special session — though that does not preclude legislators from being called back later this year for other reasons.

While signing the budget, the Governor issued 37 line-item vetoes totaling over $900 million:

• $691.3 million related to one-time capital outlay funding
• $209.4 million in general operating funding

Governor Youngkin’s vetoes reshape a budget that began the session with a projected multi-billion-dollar surplus. According to Governor Youngkin, the decision reflected more than fiscal restraint — it was a calculated response to rising federal uncertainty and what he described as “short-term risks” in the midst of federal workforce reductions and tariff impacts.

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Projects and Programs Removed:

• Higher Education Capital Projects: Funding for various capital improvement projects at colleges and universities was removed, including the Virginia Tech-Carilion School of Medicine and Biomedical Research Institute in Roanoke and the Institute for Advanced Learning and Research in Danville.
• Housing: $15 million in grant funding for a proposed first-time homebuyer program was eliminated from the budget. The Governor called the program “well-intended” but said it should be considered as part of a regular budget rather than an amended one.
• Other Cuts: The final budget removed additional funding for the Commission on Electric Utility Regulation and programs with unspent balances or other dedicated funding streams.

Funding Included:

• K-12 Education: Funding to provide teacher bonuses, increase special education investments, and lift the support cap remained intact.
• Tax Relief: Roughly $1 billion in tax cuts were preserved, including one-time rebates ($200 per individual, $400 per couple) and an increase in the standard deduction for personal income tax.
• Disaster Relief: $50 million for natural disaster response in Southwest Virginia and $50 million for community flood protection were included in the budget.
• Additional Allocations: $100 million for the Children’s Services Act, $25 million for drinking water infrastructure, and funding necessary to resolve the Medicaid funding shortfall were included.

Final Action on Bills:

In addition to the budget, the Governor acted on 91 bills that were returned to him after the Reconvened Session:

• He signed 53 pieces of legislation and vetoed the remaining 38 bills.
• The Governor’s veto statements are available here.

Of note, Youngkin approved legislation (HB 1730 & SB 894) that would make an employer vicariously liable in certain personal injury or wrongful death cases for an employee’s actions based on factors such as how likely the employee was to interact with the victim and whether the employer failed to exercise reasonable care in supervising the employee. For the second consecutive year, he vetoed a right-to-contraception bill after the legislature rejected his changes to the legislation.

Looking Ahead: Constitutional Considerations

A potential legislative dispute could arise over the validity of some line-item vetoes, which could result in a special session. Under Article V, Section 6 of the Constitution of Virginia, a line-item veto must strike the entire item — not just a portion. There is precedent from 2017 when two line-item vetoes by Governor Terry McAuliffe were not recognized by the House due to constitutional concerns.

Regardless of whether a special session is convened, Governor Youngkin is set to introduce his final budget proposal this December. The General Assembly will consider the proposal during the 2026 Regular Session, coinciding with the transition to a new administration. This November, Virginians will elect a new Governor, Lieutenant Governor, Attorney General, and the entire House of Delegates—setting the stage for a highly active political season ahead. We will continue to keep you updated as developments unfold.

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