- The Washington Times - Thursday, November 11, 2004

CHARLOTTESVILLE — Even though the state will reap hundreds of millions more tax dollars than it expected a year ago, much of the windfall is already spoken for, and the rest won’t go to long-term spending programs, legislative budget writers said.

Lawmakers could have as much as $900 million in additional revenue by the time the state budget expires in June 2006, thanks to a robust recovery from a shallow recession, financial analysts told the House Appropriations Committee.

Coming after legislators and Gov. Mark Warner struggled with $6 billion in budget shortfalls the past three years, lawmakers intend to use the surplus on capital projects and to make good on spending and tax-cut priorities promised long ago.

“We’re swimming in money, but we have obligations already approved. They’re already on the books, and we have to keep our word to the people of Virginia,” said committee Chairman Vincent F. Callahan Jr., Fairfax County Republican.

The committee’s staff director, Robert P. Vaughn, said taxes, fees and other sources that make up the state’s general operating fund are expected to increase through next summer by 8 percent over last year. That includes the $1.4 billion in tax increases that the General Assembly approved this year.

For the budget year that ended in July, general fund collections jumped by nearly 10 percent over the previous year, generating a $328 million surplus in a year that started amid bleak projections. A major reason for the surplus is that employment in Virginia, driven particularly by a jump in federal procurement spending in Northern Virginia, began a strong surge during the spring, economists told the panel at its annual autumn retreat.

Virginia continues to outpace the nation in employment.

“Right now, we’re growing much faster than the rest of the nation in terms of employment,” said Richmond-based economist Christine Chmura. “Six or seven months ago, we got back to the point where [the economy] was creating jobs again.”

Despite the rosy forecasts, spiraling costs of existing commitments will devour much of the surplus, Mr. Vaughn warned. That includes a $210 million increase in the state’s share for Medicaid, one of the largest mandated entitlements. Other commitments include a $31 million shortfall in the Virginia Health Care Fund and $26 million more for growth in welfare enrollment.

House finance leaders intend to enforce more discipline on appropriations this year than lawmakers exercised in the mid- to late-1990s when the state piled up record surpluses and directed them into open-ended programs, where costs soared annually and could not be sustained when the economic boom collapsed.

“We can ill-afford to repeat mistakes of the past, where in times of growth, we created costly new programs before fulfilling previously made commitments,” Mr. Callahan said.

Besides addressing priorities such as public education and public safety, budget writers this year should use excess revenues on “one-time obligations,” he said.

Among them, Mr. Callahan said, should be meeting the legislature’s own requirement to deposit one-third of the state’s tax on insurance premiums into the Transportation Trust Fund.

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