The great divide

Virginia’s business community faces a strangely familiar and yet uncertain state government headed into the 2022 General Assembly session, which begins Jan. 12.

Republicans rolled to victories across the board in the November 2021 election as Gov.-elect Glenn Youngkin led a GOP sweep of all three statewide offices, and Republicans also won a narrow 52-48 majority in the House of Delegates. That leaves Democrats with just a 21-19 majority in the Virginia Senate — and newly elected Republican Lt. Gov. Winsome Sears holds the ability to break any potential tie votes.

A divided state government is nothing new for Virginia. Since 2000, Republicans held unilateral control of state government only twice, from 2000 to 2002 and from 2012 to 2014. Democrats won unilateral control in 2019, ushering in sweeping policy changes over the past two years that transformed the regulatory atmosphere around everything from energy generation and legal marijuana to gambling and the balance between labor and business owners.

Youngkin, Gilbert and other Republicans already have identified laws passed over the last two years they’ll seek to roll back. That includes a 2020 act to transition Virginia entirely to clean energy by 2050; Youngkin has said he’ll use executive action to withdraw the state from a regional carbon market. Walking back actions by the 2020-21 Democratic majority will require flipping a senator, however.

Speculation on likely Democratic swing votes has centered largely around state
Sen. Joe Morrissey, D-Richmond, and his push to bring a casino to economically challenged Petersburg in light of Richmond passing up the opportunity in a failed November 2021 referendum. Due to the chamber’s ideological diversity, however, the GOP will likely target multiple Democrats for support depending on the issue.

Youngkin arrives as a largely unknown quantity. He has held no prior elected office, and while he’s discussed numerous issues with ramifications for business, he has offered few policy specifics. Political observers have gleaned clues from his early appointments to Cabinet and agency positions. By contrast, however, his governing partners in the House of Delegates have well-established records. Aside from the last two years, Republicans have controlled the House since 2000. The top two leaders there, Speaker Todd Gilbert of Woodstock and Majority Leader Terry Kilgore of Gate City, respectively have 16 and 28 years of legislative experience.

“We still have the problem of a Democrat-controlled Senate, and are there enough folks … willing to work with us on issues like taxation and regulation and workforce and things that are all going to contribute to keeping our business climate competitive and positive?” Gilbert says. “Much of this comes down to how many folks in the state Senate are willing to work with us to achieve these goals.”

Adds Kilgore: “We’re going to be playing a lot of defense as usual with Senate bills we do not support, but we’re also going to be helping Gov.-elect Youngkin with his agenda. We also want to roll some of the legislation back that has been passed over the past couple of years. I’m not saying we’ll have the votes for all those, but hopefully we can come together with reasonable minds in the Senate and work toward some positive outcomes.”

Meanwhile, Senate Democrats say they’re focusing on issues that directly affect families.

“In the upcoming 2022 legislative session, Virginia Senate Democrats are focusing on one thing: What happens at Virginians’ kitchen tables?” says Jacqueline Hixson Woodbridge, communications director for the Virginia Senate Democratic Caucus. “The heart of our homes is the center of so much of our daily lives: paying bills, completing homework, taking care of our health and so much more. Every day,
Virginians have been facing difficult realities throughout the COVID pandemic — which has further exposed many existing problems families face and exacerbated others. Senate Democrats will continue to build on the economic growth, social equity and fairness achieved in the last several years to make sure everyone in the commonwealth has the best opportunity at success possible.”

Some Democratic groups already are fundraising off their constituents’ fears that Republicans will push through a Texas-style abortion law. In an email, Whole Woman’s Health Alliance referenced oral arguments before the Supreme Court about the Texas law, warning that the Virginia GOP’s November wins make the commonwealth “a target for similar attacks that could overturn years of progress made to expand abortion rights and access.”

In remarks made to reporters after the election, Gilbert deemphasized abortion.

“You didn’t hear our caucus running on those things,” Gilbert says, referring to abortion and voting rights. “We’re focused on things we think were important. We realize we’re in a divided government right now and a lot of the issues people want to talk about, especially in the media, are important to selling papers and selling ad space, but you’re not hearing that from us.”

Instead, Gilbert says, “we’re working in earnest to make sure that we have a robust agenda to make our schools better, to make our streets safer, to make life more affordable for Virginians. That’s what we ran on.”

Subdued Assembly?

Those comments seem to suggest the state GOP is following the tenor of Youngkin’s campaign, says Larry Sabato, founder and director of the University of Virginia Center for Politics.

“I can already tell from the comments that Todd Gilbert and others have made that [Republicans] clearly want to keep a lid on the crazier ideas,” Sabato says. “Youngkin got elected by corralling the crazy. My sense is they’ll adopt the most palatable agenda possible.”

Ongoing redistricting issues and Virginia’s constitutional limit on governors to a single consecutive term mean Youngkin may have only a limited time frame to make an imprint on state government, says Mark Rozell, political scientist and dean of policy and government at George Mason University.

Some analysts speculate that the redistricting process, which is in the hands of the Supreme Court of Virginia, could trigger new House of Delegates elections this November. A federal three-judge panel will decide whether delegates must run in 2022 based on the redrawn districts. And if that impacts the balance of power in the General Assembly, it could result in Youngkin facing a Democratic majority legislature after only a year in office.

“Democrats are not going to want to give him any major legislative victories early on, and they will try to do all that they can to hold their caucus together,” Rozell says. “Given the reality of divided government and possibly an even more divided government after next year, he needs to start working in a bipartisan fashion from the beginning.”

That could include championing politically popular measures such as eliminating the sales tax on groceries or suspending the state excise tax on gasoline sales, Rozell says.

“The key is that he begins his administration with some significant legislative victories that enable him to build over time,” Rozell says.

Lobbyists also foresee a largely static General Assembly 2022 session after the whirlwind, marathon sessions of the last two years.

“Most folks I talk to have this cautious optimism that there won’t be a whole lot of stuff done this year,” says Greg Habeeb, president of Richmond-based lobbying and marketing firm Gentry Locke Consulting, and a former Republican delegate. “Nobody thinks you can do anything except at the margins.”

However, former Virginia Attorney General Jerry Kilgore, a member at the Cozen O’Connor law firm, foresees potential for bipartisan support of legislation to improve Virginia’s business climate.

“Any time you’re talking about making Virginia more friendly for business, or you have a business that wants to come here and needs legislation passed for a variety of reasons, the Senate is likely to come along,” says Kilgore, twin brother of Del. Terry Kilgore, the new House majority leader. “The Senate has overall been more business-friendly even under Democrats than the House has been under Democrats.”

The day after the November 2021 gubernatorial election, panelists at Virginia Business’ 15th annual political roundtable event expressed similar views.

“To me, if you really start thinking about the message aspects of this [gubernatorial] campaign, education and workforce was an important part of [Youngkin’s] campaign,” observed Barry DuVal, president and CEO of the Virginia Chamber of Commerce. “I think we should see an agenda from [Youngkin] that focuses on workforce and education at a high level. I also think you’re going to see some initiatives around tax reform.”

“How do we grow our economy?” asked James W. “Jim” Dyke Jr., senior state government relations adviser with McGuireWoods Consulting. “How do we make sure that everyone in Virginia has the opportunity to get a quality education, whether it’s a four-year education or two-year or [a] certification? … Once you are elected, you have a responsibility to represent every Virginian and do what’s in the best interest of the commonwealth of Virginia to move us forward.”

Nevertheless, lawmakers in the newly divided General Assembly must also take action to follow up on legislation passed in 2021, noted Amanda Wintersieck, assistant professor of political science at Virginia Commonwealth University.

“Marijuana legislation needs to be re-passed in order to take effect,” Wintersieck explained during the political roundtable. “The negotiations on licensing and possession haven’t happened yet. … At the same time, there was some pushback against the high-speed rail expansion to D.C. among the Republican coalition. We could see a reversal of what we thought were fairly set and done legislative pieces during this last session.”

No lockdowns

One topic Youngkin likely will address soon in his administration will be the coronavirus-related restrictions implemented by his predecessor, Gov. Ralph Northam. “We will not have shutdowns, we will not have lockdowns — we will be open,” Youngkin said during his Nov. 15, 2021, speech at the Virginia Tourism Summit.

During the campaign, Youngkin said he would end school mask mandates, avoid adding the COVID-19 vaccine to the list of required vaccines for K-12 students and would roll back vaccine mandates for state employees.

Terry Kilgore says he expects GOP-led legislation around vaccine mandates and pandemic shutdowns. “I think you’ll see some bills on keeping us from shutting down again and bills that don’t allow you to fire someone because they haven’t had a vaccine,” Kilgore says. “If the vaccine mandate goes through in Southwest Virginia, our hospital system is going to be decimated, our [manufacturing] plants will be decimated.”

Southwest Virginia’s coalfields already have been disrupted by market and regulatory shifts. The Democrat-led General Assembly accelerated those shifts with the Virginia Clean Economy Act of 2020, which aims to phase out coal to generate electrical power by 2045, as well as incentivizing vast swaths of solar and wind power. The legislation received bipartisan support, so it’s unlikely to be rolled back outright.

But Republicans see room for movement around the edges, particularly when it comes to consumer costs.

“Everyone says, ‘Hey, we want clean energy,’ and they say that up until they get their [electric] bill,” Kilgore says.

Habeeb anticipates more conversation about ratepayer impacts and whether to give the State Corporation Commission more oversight. But Rozell warns that Republicans should be careful not to tamper too much.

“Going after clean energy initiatives and trying to repeal some of the actions of the Democratic-led previous administration will put [Youngkin] in the crosshairs of a number of big partisan battles,” Rozell says.

Joint efforts

Republicans have little choice but to address open questions about marijuana. Democrats legalized adult possession and cultivation of recreational marijuana in 2021 but left a gaping policy void around the development of taxation and a commercial marijuana market. Incoming House Speaker Gilbert has referred to the issue as a “live grenade rolling around.”

Adds Gilbert: “The Democrat-led General Assembly legalized marijuana possession and even personal growing of marijuana, and they did absolutely nothing to lock in any regulatory environments, tax structure, oversight, you name it.”

In an interview with Virginia Business (see Q&A, Page 24), Youngkin says he wouldn’t attempt to roll back legalization of personal possession of marijuana, but he feels that the effort to create a legal retail market for marijuana needs further work.

Echoing Youngkin’s sentiments, House Majority Leader Kilgore says, “Do I think we have the votes to turn it back and make it illegal? No. But we do need to fix it if there’s going to be a retail market. We’ve got to make sure that retail market works, and it doesn’t set up a black market where the commonwealth is missing the taxes on it.”

Gentry Locke Consulting has worked with companies in the cannabis space, and Habeeb thinks a GOP-led repeal of marijuana legislation is very unlikely.

“No one in the General Assembly wants to unwind that stuff,” Habeeb says, but “all of the regulatory, all the businesses, all the licensure, all the tax revenue is totally [incomplete]. Probably a lot of Republicans don’t like legalization in the first place. The only thing worse is legalization with a black market. Many don’t want to deal with it, but they have to do something.”

The issue with the largest short-term implications for the General Assembly is one over which it may have little control: redistricting.

In 2020, Virginia voters approved a constitutional amendment to take redistricting from lawmakers and turn it over to a bipartisan commission. The commission gridlocked on plans, however, sending the question of congressional districts and state House and Senate districts to the Virginia Supreme Court. In late October, a federal judge responding to a lawsuit filed by former Democratic Party Chairman Paul Goldman appointed a three-judge panel to determine whether delegate seats will be up for election again in November, under newly drawn districts.

Jerry Kilgore says the open questions about redistricting and its potential impact on the Assembly’s balance of power will affect the session’s tone.

“The business community needs stability and probably doesn’t want to see the General Assembly have to run again in ’22,” Kilgore says. “We saw how much money [state candidates] spent this year. They’d be spending all that money in ’22 and in ’23 and have no stability in leadership. People would be constantly questioning whether the Democrats are going to take the majority back.”

Virginia Business Deputy Editor Kate Andrews contributed to this story.