RICHMOND- Governor Bob McDonnell announced today that the Commonwealth of Virginia has posted a preliminary revenue surplus at the conclusion of the 2010 fiscal year on June 30th. The Governor estimated the surplus, after miscellaneous interest payments are distributed, will be at least $220 million. The primary source of the surplus comes from individual withholding and non-withholding and corporate income tax receipts. As of January, the Commonwealth faced a $1.8 billion budget shortfall for the remainder of FY 2010. Working together, Governor McDonnell and the General Assembly closed this shortfall during the 2010 legislative session.
The final figure for the surplus will be made official in August when all year-end adjustments are made and the Governor appears before the joint money committees of the General Assembly. Today’s announcement comes just months after the Commonwealth’s budget shortfall of $4.2 billion in the FY 2011/2012 budget was also closed through spending reductions, without a tax increase.
Speaking about the financial turnaround, the Governor noted, “Just six months ago we faced a $1.8 billion shortfall in Virginia’s budget for the remainder of Fiscal Year 2010. When the General Assembly convened I made it clear that we would not balance Virginia’s budget by making it harder for Virginians to balance their own. Through bipartisan cooperation we made tough realistic decisions and closed that shortfall without a tax increase. We continued this work by addressing the unprecedented $4.2 billion shortfall in the Fiscal Year 2011/2012 budget, the spending document that has just gone into effect, in the same manner. We have reduced state spending in this new biennium to 2006 levels. At the same time we put in place funding for a number of job-creating incentives and programs that are already helping us attract new employers to the Commonwealth.”
The Governor continued, “After some necessary adjustments and disbursements that still must take place, I believe the official surplus at the conclusion of FY 2010 will be at least $220 million. The majority of the surplus is already dedicated within the budget to a number of areas. One of those is to fund a one-time non-recurring 3% December bonus for Virginia’s state employees. Our state employees have worked without any increase in pay for nearly four years. This session of the General Assembly, I proposed a plan supported by Democrats and Republicans to incentivize state employees to save state dollars at the fiscal year-end, and receive an incremental bonus of up to 3% if a surplus was achieved. For too long the unfortunate standard procedure in state government has been for agencies to spend down all appropriated funds to zero prior to the ending of the fiscal year. We successfully changed that model by implementing private sector principles of rewarding fiscal discipline and sound management of scarce resources. State employees were successful in identifying more than $28 million in savings, and I thank them for their efforts and their dedication to our Commonwealth.”
“Another area benefiting from the revenue surplus will be our local school districts. They will gain an additional $18 million in funding from surplus dollars derived from an increase in sales tax collections. It has been a tough budget for public education, and this unanticipated funding increase should prove positive for our schoolchildren.”
“In addition to these obligations, 10% of the surplus dollars, or $22 million, will be set aside, in accordance with budgetary requirements, for Virginia’s Water Quality Fund, helping the Commonwealth in our continuing efforts to clean up the Chesapeake Bay. I’m pleased that this surplus puts us on track to make the first deposit into the Transportation Trust Fund of 67% of all undesignated fund balances as required by the 2007 statute. The allocation of the remainder of the surplus will be determined in the weeks ahead in accordance with statutory requirements and final financial calculations.”
The Governor concluded, “This is a positive development for our state, but this continues to be a very tough economy. Virginia workers, families and business owners are all tightening their belts. So is Virginia state government. Through reducing spending and making tough choices we have closed historic budget shortfalls without tax increases, and run a surplus. This work has positioned Virginia to be a national leader in job creation and economic growth in the years ahead.”
Good work, Governor !