Ahead of the 2026 General Assembly session, elected officials gathered in different parts of the state to hear budget forecasts this week.
Democrats, who are now in control of all three branches of Virginia’s government thanks to a record win by Governor-elect Abigail Spanberger, are bracing for stark cuts and a slowed economy.
Democratic Majority Leader Scott Surovell and his compatriots were holed up at Radford University through Friday, but in a call Thursday evening the Fairfax-area official offered a dire warning.
“Our fiscal situation is not healthy. The Trump administration is hurting the Virginia economy;" Surovell told Radio IQ. "It’s undercutting our best jobs. We need to be prudent here and we need to plan.”
Among issues are cuts to Affordable Care Act subsidies, cuts that could see hundreds of thousands of Virginians drop health care coverage to avoid drastic premium hikes. According to documents from both retreats, the House may put forward $400 million to fill the gap; Surovell said the hole is about $230 million.
“But we also are looking at about $900 million in K-12 benchmarking, over $3 billion in Medicaid benchmarking,” Surovell said. “If we conform with federal tax law, it's going to cost us over a billion dollars in state revenue losses.”
But Republican Senate Minority Leader Ryan McDougle said economic growth in the last few years has increased Virginia’s bottom line.
“We have more money than we did last year going into the budget cycle; over $3 billion in additional revenue,” he said of Governor Glenn Youngkin’s work in recent years.
And while Democrats are debating state funds to make up lost health care subsidies, McDougle thinks that money should go straight to Virginians.
“With expenses increasing as quickly and substantially as they are, we need to see if we’re getting the best bang for the taxpayers’ dollars,” he said.
Still, McDougle acknowledged challenges were ahead.
“There’s less money for new spending and new initiatives,” he said. “We’ll have to make choices as we go through the budget, but it’s also important to look at the positives: those revenue increases.”
While the event isn’t broadcast, presentations confirm concerns about stark increases in state spending, as President Donald Trump’s One Big Beautiful Bill sees federal funds withdrawn.
New spending will also be required; an effort to reduce the state’s Supplemental Nutrition Assistance Program benefit costs will require an estimated $90 million to reduce the state’s 11% fraud rate by five points. The state's share of SNAP spending, previously covered by the federal government, would increase by nearly $400 million annually without the change.
On the tax side, federal income taxes will see the highest 10% of earners will see household resources increase by about $12,000 dollars, while the lowest 10% will see resources decrease by about $1,300.
And while Youngkin touted increases in jobs and other investments in the Commonwealth as he nears the end of his term, a report from S&P Global presented Thursday suggested Virginia’s job market would remain stagnant late into 2026.
“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,” one slide reads.
The one bright spot in Virginia’s economy, according to the same report, is the explosion of data centers across the Commonwealth.
“Intellectual Property Products (largely AI-related) CapEx investment is outpacing all other sectors” the slide reads. “Business investment related to AI is offsetting weakness in other investment areas and in the economy at large.”
Governor-elect Spanberger attended both retreats.
In an interview with the Daily Show’s John Stewart for his weekly podcast, she said she’s walking into office with massive federal funding cuts.
“It’s millions upon millions upon millions pulled back on transportation projects, pulled back from research at our many, many public universities and private universities; it’s impacts on health care,” Spanberger said.
Youngkin will present his final budget in mid-December, though Spanberger and legislative Democrats are expected to finalize the spending plan during the 2026 session.
This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.
