Governor McDonnell Announces Proposed Amendments to the 2012-2014 Budget

December 20, 2012
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Increases Rainy Day Fund to $740 Million; Eliminates 98% of Accelerated Sales Tax; Eliminates Entire Local Government Budget cut of $45 Million

McDonnell: “Solving major challenges takes bipartisan effort and leadership in both branches to make the difficult choices and set the right priorities. Two major policy challenges I want to address in budget and law with your help are to reform and better fund transportation infrastructure and K-12 public education. This budget and this session should be aimed at fixing problems in these two areas, and laying the foundation for Virginia’s future opportunities to ensure that our citizens have greater access to the American Dream.”

RICHMOND – Governor Bob McDonnell unveiled his proposed amendments to the 2012- 2014 budget in a speech to the Joint Money Committees of the General Assembly this morning in Richmond. The governor’s budget amendments capitalize on $92.7 million in agency savings, reductions in spending of $431.6 million and conservative budget forecasting to focus resources on addressing Virginia’s transportation challenges, education reforms, health care program and reserves. The amendments target state spending on the core functions of government, and on policies most directly tied to job creation and economic development, while not raising taxes.

Virginia revenue estimates, adjusted for a standard minus outlook, expect general fund revenues to grow at 3.6 percent in FY 2013 and 3.8 percent in FY 2014. Overall, the governor’s budget amendments result in a net increase in overall spending for operations of $211.4 million, including 75 amendments from either targeted or agency reduction plans for a savings of $92.7 million, 75 individual amendments which decrease spending by a total of $431.6 million, and 204 amendments which increase spending by a total of $735.7 million for the biennium.

The spending increases focus on six major themes for improving Virginia’s financial health, including:

Provide adequate funding for core services and reduce structural imbalances and gimmicks
Increase liquidity to guard against future economic uncertainty and the potential impact of federal spending reductions
Increase support for instructional spending on public education
Continue investments in higher education
Improve funding for transportation
Improve support for localities

The full text of the governor’s remarks to the Joint Money Committees can be found here: http://www.governor.virginia.gov/utility/docs/Dec12JMC.pdf

Speaking about the budget amendments, Governor McDonnell said, “In these difficult times for Virginia and our country, state governments are called upon to lead the nation in fiscally responsible decisions that address the core concerns of our citizens without rhetoric, unsustainable spending practices and gridlock as displayed by our leaders in Washington. The Commonwealth has a longstanding record of working across party lines to demonstrate fiscal responsibility, accountability and restraint in our stewardship of the people’s resources.

“Since the beginning of this administration, we have eliminated $6 billion in budget shortfalls and turned those into 3 years of surpluses totaling nearly $1.4 billion, even in the face of slow growth in our tax revenues. We have not raised taxes. We have invested historic new funding into transportation and job creation, and we have made the tough choices about where limited taxpayer dollars should be directed to best spur private-sector job creation, resulting in the lowest unemployment rate in the Southeast, and the second-lowest rate east of the Mississippi River.

“The budget amendments that I am presenting today reflect the core priorities of government and our administration. They recognize the realities of this economy and the looming uncertainty that budget gridlock in Washington and the fiscal cliff are having on our economy. Yet they look forward to building upon our legacy of conservative and sound budget decisions to lay the groundwork for the future of our great Commonwealth. These amendments use the resources gleaned through agency savings, sound management practices and prioritizing our spending to reform, restructure and reinvest in programs that make government more efficient, effective and accountable. They fund key budget areas like education and transportation that lay the foundation for a prosperous future for our citizens. And they enhance cash reserves and liquidity as insurance to provide us flexibility in addressing the potential impacts of uncertain federal spending while maintaining Virginia’s critically important Aaa bond rating.”

“Virginia citizens and businesses must make tough decisions every day to live within their means and our government must continue to do so as well. Though the challenges of the Great Recession and federal spending uncertainly cloud the skies, Virginia’s future remains bright. These budget amendments clear the path for prosperity while reducing regulations and promoting business-friendly policies that will help the private sector grow and create jobs here in the Commonwealth.”

Selected Highlights of the Governor’s Budget Amendments in the Six Key Areas:

Provide adequate funding for core services and reduce structural imbalances and gimmicks

$64.4 million for state employee health insurance fund requirements
$15.5 million for inmate medical care ($14.1 million after Medicaid reimbursement)
$14.3 to open River North Prison in Grayson County to reduce jail and prison crowding
$20.8 to eliminate Accelerated Sales Tax payments for 98 percent of retailers

Increase liquidity to guard against future economic uncertainty and the potential impact of federal spending reductions

$50 million early deposit to the Revenue Stabilization (Rainy Day) Fund
$10 million to reduce exposure from not selling Brunswick prison
Maintain FACT fund and allow for additional deposits

Increase support for instruction spending on public education

$58.8 million to fund the state portion of a 2 percent pay increase for SOQ-funded teachers and other instructional school personnel
$4.9 million to fully fund SOQ standards for blind and visually impaired students
$15 million for strategic compensation grants

Continue investments in higher education

Tuition Assistance Grants (TAG) for undergraduate students increased to $3,100
$30 million in FY 2014 (in addition to more than $200 million historic investment in Appropriations Act) including:
- Over $4.2 million to cover interest earnings and credit card rebates
- $5.7 million for workforce development initiatives
- $4.9 million for enrollment growth
- $7.8 million in degree completion incentive funding
- $3.9 million for base operating support
- $1.9 million for financial aid
- $1 million for research
- $600,000 to maintain support of college room, board, books and supplies stipends through the Virginia Military Survivors and Dependents Program.

Improve funding for transportation

$48.1 million in redirecting a portion of general fund sales tax revenue to transportation

Improve support for localities

$45 million to restore aid to localities reduction
$2.1 million to fund salary increases for assistant Commonwealth’s attorneys
$7.5 million for BRAC support
$16.9 million for Water Quality Improvement Fund including
- $2.3 million for local storm water programs
- $14.6 million for agricultural best management practices
$200 million for water quality bond projects including:
- $5 million for Hopewell
- $59 million for combined sewer overflow projects in Richmond and Lynchburg
- $35 million for urban storm water
- $101 million for prior commitments and new anticipated commitments through FY 2016