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Youngkin vetoes measure to let Virginia localities increase sales tax to pay for school construction

Photo courtesy - Shutterstock
Photo courtesy - Shutterstock

Local governments will have to find other ways of funding school construction and modernization costs after Gov. Glenn Youngkin vetoed  legislation on Monday that would have allowed them to impose a 1% sales tax for such projects.

This story was reported and written by our media partner The Virginia Mercury

Under the bill, local governments could only impose the 1% sales tax if voters approved the tax  in a referendum. 

While Youngkin said school construction is a “worthy cause,” Virginia has taken significant measures to address school construction costs, he added, and citizens should not be paying additional taxes — especially $1.5 billion annually that would be generated from the 1% sales tax.

“The commonwealth should pursue a tax policy that unleashes economic development and prioritizes job and wage growth through innovative reforms,” said Youngkin in his  veto. “These reforms must allow hardworking Virginians to keep more of their money, not less; any proposal that increases the cost of living and the cost of business is not a policy we should pursue.”

Since Virginia is a Dillon rule state, local governments are only allowed to exercise powers the legislature has specifically authorized them to have. While localities have control over adjustments to their property tax rates, they aren’t allowed to change the sales tax rate without explicit permission from the General Assembly.

Currently, state law only allows nine localities —  the counties of Charlotte, Gloucester, Halifax, Henry, Mecklenburg, Northampton, Patrick and Pittsylvania and the city of Danville — to impose a 1% sales tax to fund school construction and renovation projects. Similar legislation to add the city of  Newport News and the counties of  Prince Edward and  Stafford to the list failed during the last legislative session. 

The Virginia Department of Education determined through a  survey that over half of Virginia’s schools are over 50 years old, with replacement costs for each in the millions.

The governor said the proposal would have given some localities a combined sales tax rate of eight percent, with no additional offsets, such as reduced income tax or property tax. Youngkin also pointed out that the bill would’ve allowed localities to use the sales tax revenue for purposes beyond funding school improvements. 

“While the tax is dedicated to school capital costs, such as information technology, the new source of revenues would indirectly release funding for other purposes, supplanting other revenues without necessarily increasing education spending,” he said.  

The 2022 state budget, the governor said, supported more than $3 billion in school construction projects through targeted assistance, formula-based school construction and modernization grants, and low-interest loans  — all achieved while providing citizens over $5 billion in tax relief.

Youngkin’s proposed “Common Ground” budget, which he  announced on Monday, supports a $1.2 billion increase in K-12 appropriations over the biennium and makes available substantial construction loan and grant funding for school construction.

Sen. Jeremy McPike, D-Prince William, and Del. Sam Rasoul, D-Roanoke, the 1% sales tax bill’s carriers, were displeased with the veto after garnering support from other lawmakers including Del. Terry Kilgore, R-Scott, who carried similar  legislation that was incorporated into Rasoul’s bill.

McPike posted on  X that when students go to school, they’re not going to a Democratic or Republican school. They’re going to a school with a leaky roof.

“This bill had remarkable bipartisan support from all corners of the state, and while schools all across the commonwealth continue to suffer from crumbling infrastructure, the governor continues to play political football,” McPike said. “Our kids deserve better.”

Rasoul said he learned about the decision late Monday night and was surprised, since the bill had significant support in both chambers and from the public.

“So many localities in and around my region were happy to have this latitude to be able to raise funds for school construction, and the governor vetoing this bill that had such broad bipartisan support surprised so many,” Rasoul said.

The Virginia Association of Counties and Virginia Municipal League, representing local governments across the commonwealth, also supported the legislation.

“Without this permissive option, many counties and cities will have to fund school construction and modernization by increasing other taxes – such as the real estate tax – which places a greater burden on their residents,” said Josette Bulova, policy communication coordinator for VML.

Jeremy Bennett, director of intergovernmental affairs for VACO, said the association is still optimistic about the 1% sales tax bill and is focused on helping to maintain bipartisan support for it when lawmakers return for the reconvened session on April 17. 

“Our folks view this as a tool to help their communities,” Bennett said. “It’s about giving parents and citizens a voice in their community and how they fund their schools, and yes, we are still hopeful that we can get this over the finish line, and our members want us to keep fighting for it.”