Two-Day Virginia Budget Summit Highlights: “Risks are Skewed to the Downside,” “Job Growth is Expected to be Flat,” “Mandatory budget pressures outpace revenue growth”; etc.

On Thursday and Friday (11/20-11/21) in Radford, the Senate Finance & Appropriations Committee held its annual meeting, focused on “Fiscal Issues Facing the Commonwealth. There was a TON of information presented, which you can see here, with topics including: “U.S. States Navigate a New Era”; “Virginia Economic Trends & Labor Market”; “H.R.1 Impact on Virginia & Federal Outlook”; “Virginia’s Revenue & Budget Outlook”; “Public Ed. Trends & 2026 Session Outlook”; “Medicaid Trends & HHR 2026 Session Outlook”; “Public Safety Trends & 2026 Session Outlook”; “The Budget”; “Higher Education Update & Emerging Issues “; etc. For just a few of many highlights, see below. Also, for a good summary of the situation, see this WVTF article by Brad Kutner, which quotes VA Senate Majority Leader Scott Surovell as follows:

“Our fiscal situation is not healthy. The Trump administration is hurting the Virginia economy…It’s undercutting our best jobs. We need to be prudent here and we need to plan…we also are looking at about $900 million in K-12 benchmarking, over $3 billion in Medicaid benchmarking…If we conform with federal tax law, it’s going to cost us over a billion dollars in state revenue losses.”

Not great, in other words – thanks overwhelmingly to Trump and Congressional Republicans.

• According to Thomas Zemetis of S&P Global Ratings: “The combined effects of U.S. trade, immigration, and federal government costsaving policies are adding downside risk the economy”; “Our forecast for U.S. real GDP growth will slow to 1.9% (yoy) by Q4 2025 and tick down to 1.8% by year-end 2026”; Virginia’s unemployment rate went from 2.7% in 2023 to a forecasted 3.5% in 2025 and 4.0% in 2026, with the state’s real GSP growth slowing from 3.0% in 2023 to 1.3% this year and just 0.9% next year. Not great!
• “The U.S. tariffs that took effect this month push the U.S.
  effective tariff rate to more than 17%—about 7.3x the 2024 rate of 2.3%.”
• “New entrants to the labor force, especially people who are early on in their careers, appear to be bearing the brunt of the current ‘low hire, low fire’ labor dynamic.”
• “U.S.
• Also of note: “The federal government has reduced net
  employment levels by more than 80,000 between January and July 2025. 11,200 of those jobs were in Virginia.”
• “Work requirements for the ACA-based Medicaid expansion
  population beginning at the end of 2026, although these
  could be delayed upon state request and federal approval
  until the end of 2028”

• According to this presentation by April Kees of the VA Senate Finance & Appropriations Committee on the impact of H.R. 1 (the Big UGLY Bill), “H.R. 1 will have a Significant Impact on Virginia’s Budget,” including “Changes to Medicaid and SNAP,” “Eliminations and changes to clean energy programs”; “Modifications to higher education funding and student financial aid”; “Tax policy extensions and new tax policy changes”
• “SNAP Changes in H.R. 1 Result in a Significant
  Cost Shift to the State” – “Fiscal impact up to
  $270.0 million GF a year” starting October 1, 2027 (and $90 million GF per year starting October 1, 2026); “Virginia will have to Cover Nine Months of the New Match on Benefits in the 2026-2028 Budget”; “H.R. 1 also Shifts More of SNAP’s Administrative Costs to the States”; “SNAP H.R. 1 Changes Result in a Total Additional GF Cost of $360.0 Million GF Annually if the Error Rate is not Reduced”
• ‘”Most Significant Change to Medicaid is the Community Engagement Requirement”
• “H.R. 1 contains significant modifications to, or elimination of, the majority of clean energy tax credits that were
  passed in the Inflation Reduction Act”
• “Conforming to H.R. 1 would Reduce GF Revenue by $1.1 Billion”

• According to this presentation by April Kees of the VA Senate Finance & Appropriations Committee, “There are more downside risks at this point to Virginia,” including “Tariffs increasing prices and altering consumer behavior; Labor supply and demand; Federal employment and contracts; Low-income household financial distress; Government shutdown in 2026 (SNAP funded through FFY2026); Federal Reserve interference or misstep; and AI bubble.”
• Also: Year-Over-Year Job Growth is Slowing in Northern Virginia and Hampton Roads”; “Data Suggests a “Low-Firing, Low Hiring” Job Situation”; “Virginia Job Growth is Expected to be Flat”; “Medicaid Forecast Reflects Significant $3.2 Billion GF Need for FY 2026 and the Upcoming 2026-2028 Biennial Budget”

• Per this presentation on “Medicaid Trends & HHR 2026 Session Outlook,” “Medicaid’s growth rate has outpaced growth in GF revenue over the last two decades, increasing its share of the overall budget”; “The Medicaid Forecast requires an additional $410.3 million GF in FY 2026, and $2.8 billion GF over the 2026-2028 Biennium”; “Total Health and Human Resources budget pressures are projected to require $434.7 million GF in FY 2026 fand $3.5 billion GF over the 2026-2028 Biennium.”

• According to this presentation, “Higher Education in Virginia: Update and Emerging Issues,” “Virginia’s Higher Education Institutions are Nationally Recognized”; “Undergraduate enrollments at public four-year and public two-year institutions have recovered from the pandemic dip. Overall enrollment is expected to increase for the next four years, but some institutions may experience declines.”
• “Virginians overwhelmingly agree their colleges are a valuable asset, well-run, and a sound place to invest.”
• “No investment produces a higher ROI for the Commonwealth” than public higher education (each dollar spent “produces more than $25 in greater [GSP] and returns nearly $2 to the state treasury”.
• “Virginia ranks 28th among the 50 states in state support of higher education.”
• “Tuition and E&G Fees are Higher than Most States”; “Tuition and E&G fees for in-state undergraduates have increased by an average of 3.2 percent annually over the past 10 years.”

• Per this presentation, “Public Education Trends &
  2026 Session Outlook,” “Virginia Public Schools Enroll 1.2 Million Students, but Projected Enrollment Trends Show Decline Through Fall 2028”; “When compared to Fall 2023 enrollment data, most Virginia school divisions are projected to experience declines by Fall 2028” (steepest declines in Southwest (-7.4%) and Western Virginia (-6.0%), then Southside (-4.6%), Tidewater (-4.0%) and Northern Virginia (-3.7%), with small increases in Central Virginia (+0.5%) and the Northern Neck (+2.5%).
• “Ten Divisions Enroll Over Half of all K-12 Students” (Fairfax, PW, Loudoun, Chesterfield, VA Beach, Henrico, Chesapeake, Stafford, Arlington, Norfolk)
• “State Appropriations Per Student have Increased
  Despite Stalled Enrollment Growth” (“Investment in K-12 education has increased and has kept pace with inflation, despite lack of enrollment growth in recent years.”)
• “FY 2026 Ongoing Spending Increases the Base Budget of
  Public Education by $1.3 Billion Annually”
• “On Average, the State Funds 55.0 Percent of Calculated SOQ Costs, but the Share of Costs Varies by Locality”; “LCI ranges from 0.16 to 0.80”; “The LCI is capped at 0.80,
  meaning that no division pays more than 80.0% of calculated SOQ costs.”

• According to this presentation, “Public Safety Trends and Outlook,” “Virginia’s Violent Crime Rate Decreased in 2024 After Increasing for Several Years” and “Virginia’s Property Crime Rate Decreased for the Past Two Years After Increasing in 2022”