Virginia is closing its books in the black for the third consecutive year, raking in $129 million more than the state projected for the fiscal year that ended June 30, Gov. Bob McDonnell announced Monday.
Revenue collections grew by 5.4 percent last year, ahead of a forecast 4.5 percent, returning them to a level not seen since fiscal 2008.
"I think it's in large measure a reflection of the priorities that we've set the last couple years, focusing heavily on economic development, on job creation, on incentives, on foreign-trade missions, on a number of things that have helped to create more economic activity in the commonwealth," Mr. McDonnell said Monday.
He pointed out that key drivers of the surplus revenue were income taxes and sales taxes, two primary indicators of economic growth. The state received $33.7 million more than expected in income-tax withholding, which is collected from most people's paychecks, and $55.5 million more than projected in sales- and use-tax collections.
Much of the money, though, is already constitutionally obligated for specific purposes. About $78.6 million will go to the Rainy Day Fund — which can be tapped when general revenues drop lower than 2 percent of projections — bringing its total to about $690 million. Just more than $12 million will go to the state's water quality fund, and about $20 million will go toward phasing out a program unpopular with businesses that requires them to pay their July taxes a month early.
The $129 million does not include state agency savings, which largely come from unspent general fund appropriations and will be announced next month. There must be approximately $80 million in savings for state employees to receive a full one-time, 3 percent bonus.
The state has achieved more than $100 million in agency savings the past two years, and Mr. McDonnell said he was optimistic it would have enough to pay the bonus.
Mr. McDonnell also used the platform as another opportunity to blast Washington and President Obama. As part of a deal to raise the country's debt ceiling last summer, Congress agreed to cut $1 trillion over the next 10 years, with $1.2 trillion to come equally from defense and domestic programs if a congressional supercommittee failed to find the cuts elsewhere. The cuts were not found, and the specter of "sequestration" now looms over Virginia, whose economy is heavily dependent on defense contractors and military spending. Mr. McDonnell was to attend a "rally against sequestration" later in the day in Northern Virginia.
"Because [Congress] couldn't get a budget deal, they couldn't balance a budget, they couldn't find the discipline and the formula to properly rein in spending, they basically hung the sword of Damocles over everybody and said, 'Well OK, if we can't get a deal, $600 billion in defense cuts, $600 billion in domestic cuts,'" he said. "None of them really thought that was going to go into effect; but as you know the rest of the story now, the supercommittee failed, the Congress has failed to come up with another plan that has passed both Houses, the president has been invisible. He's been a bystander when it comes to leading on this issue. And so now we're possibly risking the Defense Department if this goes into effect in five months."
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