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Virginia posts surplus, but federal deficit threatens bond rating
Question of the Day
Virginia Gov. Bob McDonnell said Tuesday the commonwealth finished fiscal 2011 with a revenue surplus of $311 million but could still have its bond rating downgraded unless the federal government resolves an ongoing dispute over the debt ceiling.
Mr. McDonnell, a Republican, said Virginia finished fiscal 2011 with $15.45 billion in general fund revenues, including transfers — the second straight year the commonwealth has finished with a surplus.
But the good news was tempered by the credit rating agency Moody’s saying it has put Virginia’s highly prized AAA bond rating under review, as negotiations on the federal deficit stall in Washington. Mr. McDonnell said at a news conference in Richmond that he was “furious” about the review.
“Every factor that they outlined in there — there were two or three — has to do with what’s happening in Washington,” he said. “It’s not anything that we’re doing here in Virginia. So, as I mentioned, when we visited [Moody’s analysts] in January they were very complimentary of the way our resources have been managed here. But it’s related to the federal budget and the number of federal employees and the impending meltdown in Washington if they don’t get an agreement.”
The company also put under review Maryland, New Mexico, South Carolina, and Tennessee all states with a significant population of federal workers.
Mr. McDonnell said the state’s surplus was driven by stronger-than-expected collections in individual income tax receipts from payroll withholdings and non-withholdings. Total revenue collections increased by 5.8 percent, exceeding the revised annual forecast of 3.5 percent.
Withholding collections, which comprise 65 percent of total general fund revenues, increased by 5 percent, ahead of a revised estimate of 4.3 percent. Collections in non-withholding increased by 14.3 percent.
Nearly every state is required by law to balance their budgets each year. Virginia has fulfilled the requirement by slashing billions out of its budget over the past several years while using federal stimulus dollars to help offset the cutbacks.
Under Virginia law, much of the surplus money is already allocated. Roughly $146.6 million will go toward the state’s rainy day fund, and $32.2 million will be set aside for the Water Quality Improvement fund, for cleaning up the Chesapeake Bay.
The governor also wants to use $4.3 million of the surplus for disaster relief associated with April tornadoes that swept across southwest Virginia and $7.4 million for supplemental funding for sheriff’s offices. Under a 2007 law, two-thirds of all undesignated surplus balances go toward transportation.
Democrats were quick to characterize the claims of a surplus as disingeuous, given the means lawmakers have used to balance the state budget.
“While this budget surplus is certainly preferable to a shortfall, we should be clear about its origins,” said Delegate David Toscano, Albemarle Democrat. “First, our national economy is improving and revenues are up as a result. Second, we neglected our obligations in the last budget to adequately fund our state’s retirement plan. Third, the surplus was generated because of substantial cuts made to localities and our social safety net.
The General Assembly deferred more than $600 million in payments to its retirement system last year to help balance its current two-year, $80 billion budget. The governor said he wants to use part of the surplus to start shoring up the system.
The budget figures announced Tuesday are based only on revenue, and Virginia’s final figure, which will include savings, will not be released until August. The final surplus figure for fiscal 2010 was $403 million.
At least a dozen states ended fiscal 2011 with surpluses including Indiana, which reported one of the largest, an extra $1.2 billion.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
David Sherfinski covers politics for The Washington Times. He can be reached at firstname.lastname@example.org.
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