Glenn Youngkin warns of Virginia recession but vows to pursue tax cuts

“One of our key priorities is not to be in a circumstance where we get over our skis on either side of this — tax cuts or in spending,” Youngkin said this week in brief remarks to reporters after meeting with a panel of business leaders to assess the state’s economic outlook.

Youngkin presided over the annual closed-door meeting of the Governor’s Advisory Council on Revenue Estimates, a group of corporate and financial leaders — as well as lawmakers from General Assembly money committees — who provide economic forecasts that help frame the budgeting process.

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Youngkin said the panel’s broad consensus over two hours of discussion was that some degree of economic slowdown seems likely. “Generally, there is expectation that there will be a recession next year,” he said. That requires budget officials, he added, to be “very prudent in what we do, particularly next year as we head into a storm — and we really all believe it will be a storm; we’re just not sure whether it’s a tropical storm or a hurricane-level storm.”

Inflation, Russia’s invasion of Ukraine, supply-chain issues that linger from pandemic-related shutdowns, as well as the Federal Reserve’s steady increase of interest rates to fight rising prices all contribute to economists’ expectation of a coming recession. But Youngkin pointed out that Virginia is in an unusually good position to withstand the drop in tax revenue that could go along with a cooler economy.

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That’s because two years of federal pandemic relief, combined with a sharp rebound by corporations and the wealthiest taxpayers, have left state coffers filled to the brim. Thanks to measures passed by the General Assembly and signed into law by Youngkin and his predecessor, former governor Ralph Northam (D), Virginia is set to achieve an all-time high in its budget reserve funds.

By the end of next year, Youngkin said, the state’s reserves will top $4 billion, or roughly 15 percent of the state’s general fund — a level state lawmakers once thought was nearly unattainable. Those reserves help protect Virginia’s prized triple-A bond rating and can safeguard finances if revenue comes up short. In addition, the state finished the last fiscal year with a surplus of $3.2 billion.

“The commonwealth is in its best financial position ever,” Youngkin said, although he has also argued that some of that fiscal cushion is the result of over-taxation during Democratic administrations in Richmond.

Youngkin’s office reported strong tax-revenue figures for October, with collections up 3 percent compared with the same month a year ago. That included…