- Associated Press - Monday, December 17, 2012

RICHMOND — Gov. Bob McDonnell offered cautious revisions Monday to Virginia’s two-year budget, targeting modest spending increases for indigent health care, conditional raises for teachers and a hefty $128 million deposit into the state’s rainy day reserves.

The amendments he submitted to the General Assembly’s budget-writing committees also take Virginia’s cash-strapped cities and counties off the hook for a combined $45 million in state support they would be forced to return under the current budget.

Wary of an economic shock that would disproportionately harm Virginia if Congress can’t agree on federal deficit reductions and avoid a year-end “fiscal cliff,” Mr. McDonnell tempered predicted state revenue growth on which spending for core services budgeted through June 2014 is based. The estimate for 4.5 percent growth in fiscal year 2014, which begins July 1, will be decreased to 3.8 percent.

Mr. McDonnell, in presenting his revisions to legislative budget writers Monday, offered 150 midpoint amendments for year two of the budget that prescribe a total of $524 million in agency savings or spending cuts. He made 204 amendments that increase state spending by a total of $735.1 million.

While that’s a net increase of $211 million in spending over cuts, it’s less than one-fourth of a percentage point in the scope of an $80 billion biennial state spending blueprint.

Nearly $59 million worth of the proposed spending increases would fund the state’s share of a 2 percent raise for teachers, librarians, principals and instructional aides — their first in four years. Mr. McDonnell disclosed that proposal last week, tying the appropriation to passing his “Educator Fairness Act,” which would make it easier for local school districts to fire underperforming and incompetent teachers, a provision of which the 60,000-member Virginia Education Association is wary. An additional $15 million Mr. McDonnell also seeks as merit pay for teachers is not dependent on passing the EFA.

Mr. McDonnell, a Republican, seeks nearly $70 million to hold down health insurance premium rate increases for state employees. Co-payments for emergency room visits would increase from $125 to $150.

He asks for nearly $115 million in increased spending to cover expanded use and inflation for health care services through Medicaid, the federal-state program that covers the needy, disabled, elderly, blind and low-income families with children.

His amendments shift about $48 million from the general fund to transportation by slightly increasing transportation’s share of the state retail sales and use tax. Finance Secretary Ric Brown told reporters in a briefing about the budget Sunday that it’s a tiny piece of transportation financing reform legislation Mr. McDonnell is still drafting. Mr. McDonnell said he hopes to generate an additional $500 million annually for highway maintenance but won’t discuss it further until he unveils his bill sometime before the legislature convenes Jan. 9.

Much of the $93 million in savings Mr. McDonnell incorporated into the revised budget was pulled from a vast menu of proposals that state executive branch department heads submitted to trim their own agency budgets by up to 4 percent. Absent were several proposals that would have shifted costs for programs and services the state now underwrites onto local governments.

Instead, Mr. McDonnell’s budget halts an ongoing mandate requiring cities and counties to send back $60 million in state aid over several years. His amendment excuses repayment of three-fourths of that amount.
“It’s like an increase in state aid, if you will,” Mr. Brown said Sunday.

Tuition assistance grants for undergraduate students at private Virginia colleges and universities would increase from $2,800 to $3,100 under Mr. McDonnell’s proposals.

Among the cuts that will be particularly unpopular in the state’s most populous and expensive region, Northern Virginia, is a $12 million reduction in aid that helps school districts retain non-teaching employees who are being lured to better-paying comparable jobs in other states.

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