Monday, August 19, 2013

Gov. McDonnell announces $585 million budget surplus but at what price to localities

Virginia Governor Bob McDonnell announces budget surplus.

Virginia Governor Bob McDonnell announces budget surplus.

Virginia finished FY 2013 $585 million in the black and is the fourth consecutive budget surplus in the McDonnell Administration. The governor had previously announced the revenue surplus for FY 2013, which is officially $264.3 million. Today he informed the members that the second half of the overall surplus equation, state savings, came in at $320.7 million, leading to the overall surplus amount of $585 million, Virginia’s largest surplus since 2005.

This latest surplus puts the cumulative surplus total during the four fiscal years of the McDonnell Administration at nearly $2 billion. The governor also announced in his speech that even while running surpluses every year, and investing in the core functions of government like transportation, education, public safety and economic development, general fund spending in Virginia, when Rainy Day Fund deposits are subtracted, has only increased by a paltry 0.3% over the last six years, which is far less than the rate of inflation and population growth in the Commonwealth during the same period. The state budget is divided into two halves: general fund and non-general fund. The general fund is the portion largely controlled by state government decisions and consists of general tax dollars. The non-general fund is the component over which lawmakers in Richmond possess only limited discretion, as it contains funds that are legally dedicated for specific purposes such as federal funds and pass throughs and fees generated by state entities like colleges and universities.

Gov. Bob McDonnell touted, “Today I’m pleased to announce another positive result: For the fourth straight year, we have generated a significant surplus in state government finances.  The Commonwealth finished fiscal year 2013 with a total budget surplus of $585 million, the largest since 2005. This is made up of an additional $264.3 million in general fund revenue collections and transfers above the official budget estimate, up slightly from the initial $261.9 million estimate I announced last month. Additionally, we finished the year with a substantial $320.7 million in balances, savings and recoveries from unexpended general fund appropriations and other unexpended nongeneral funds that must be reported on the general fund balance sheet as liquid assets.  Taken together with the budget surpluses that I have previously announced over the last three years, the cumulative surplus for the last four years now stands at nearly $2 billion. This joint achievement is remarkable when one considers the difficult economic conditions we worked through together.  The total surplus on the revenue side alone constitutes the first time since the Allen administration that an administration has attained a revenue surplus at the end of all four of its fiscal years in office.”

*** The Virginia Association of Counties says not so fast in taking the credit for the surplus. The $585 million surplus in state general funding is achieved through funding shifts to local governments. Local governments are still stinging from previous state funding reductions in Aid to Localities. Reductions since 2009 encompass public education, health and human services and the comprehensive services act.

Read more about the VaCo citing pension reform changes, line of duty programs shift to localities, constitutional officer liability insurance shift to localities and aid to localities (money sent to the state by localitis to balance the states budget while localities had to balance their own budget by cutting services and employees.) “With the state enjoying a surplus, now is the time to reverse the shifting of state programs to localities and reinforce county budgets,” they say.

READ: Virginia Association of Counties wants relief from budget-busting mandates

The governor further stated, “Our good performance on the revenue front is concrete evidence of the Commonwealth’s improving jobs picture, real estate market, and overall economic conditions.  Virginia has created 172,600 net new jobs since February 2010.  Over 90% of those jobs are in the private sector. Virginia’s seasonally adjusted unemployment rate has declined from 7.4% in February 2010 to 5.5% today.  Our unemployment rate is the lowest rate in the Southeast, and well below the rates of our neighboring states. It is the third lowest state unemployment rate east of the Mississippi.”

*** Gov. McDonnell failed to mention today’s announcement that the unemployment rate has increased to 5.7% which is the third consecutive month of increased unemployment. See 

Virginia unemployment rate increases for third consecutive month

Additionally, the governor reported to the committee members, “While we are on the subject of state spending, I want to call your attention to a little known fact.  If you examine the growth of general fund operating appropriations from 2007 to 2013, and subtract the required Constitutional deposits to the Revenue Stabilization Fund in those years, since those deposits are actually savings rather than spending, what you find is that the net general fund operating appropriations increased by only $56.9 million over that six-year period. This represents a total increase of 0.3% percent, which equates to an annual average growth rate in general fund spending of one-tenth of one percent per year, well below the growth rate of inflation and population growth over the same period. The bottom line is that, during this administration, we have worked closely with you to firmly hold the line on state spending and focus on economic growth. I am especially pleased with our bipartisan accomplishments and new targeted investments in K-12 and higher education, public safety, economic development, health and human services, natural resources, and transportation.”

The State Constitution and the Appropriation Act contain a number of provisions and contingent appropriations that specify how most of a budget surplus must be used. At this link you can find a full breakdown of the distribution of Virginia’s FY 2013 budget surplus:

Posted By Valerie Garner

Categories: Finance, Politics, State Politics

Tags: , ,

Comments (4)

Valerie Garner

August 19th, 2013 at 8:58 PM    

Surplus should be used to alleviate the pain inflicted to localities over the past years and Gov. McDonnell brags on the budget surplus.

Valerie Garner

August 19th, 2013 at 9:01 PM    

See what the Virginia Association of Counties has to say about where the surplus came from – by bleeding localities including cities.

Valerie Garner

August 19th, 2013 at 9:02 PM    

See what the Virginia Association of Counties has to say about where the surplus came from – by bleeding localities including cities.

Cameron C Caffee

August 22nd, 2013 at 1:12 AM    

How about returning some money to the taxpayers whence it came ?

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