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By Stephen Groves
Gov. Robert F. McDonnell’s step had a $400 million jingle to it as he strode confidently into the joint meeting of the Senate and House Finance Committees on Thursday.
The governor announced to the committees how the $403.2 million budget surplus will be spent: $82.2 million for three percent, one-time bonuses for state employees, $36.4 million for the Virginia Water Quality Improvement Fund to help clean up the Chesapeake Bay, $32.7 million for transportation, $18.7 million to school funding, and other various obligations.
“This is not a windfall with a pile of cash that should be distributed,” McDonnell said. “All but $71 million have, essentially, already been designated.”
There will be $71.2 million left over for the governor to decide how to use. The governor has until Nov. 1 to decide where the money will go. The surplus comes from $175 million in savings from state agencies and $228 million in better-than-expected revenues.
The governor praised state employees for their frugality, and said they deserved to be given back some of the money they had saved.
“It’s a great way of getting people to have skin in the game, to care about results, not spend all the money in the budget,” he said. “They saved $175 million, which is twice the amount that it takes to pay for this one-time, $82 million bonus.”
While the general fund revenue declined in the last fiscal year, the decrease was not as bad as predicted. Due to growth in the last quarter of the 2010 fiscal year, the revenue only decreased 0.7 percent rather than the predicted 2.3 percent. Which means the general fund had $228.5 more than expected at the end of the day.
But critics say that the surplus is only a result of budget maneuvering rather than actual savings.
“It’s not how I envision a surplus coming about when last November you start drastically cutting agencies to finish out 2010 and you lower your estimates,” said Senate Majority Leader Dick Saslaw, D- Springfield.
He said the budget surplus mostly came from pessimistic revenue estimates. Sales tax collections jumped in June, which caused more money to come into the general fund than expected.
The budget also made up some of the $1.8 billion hole it had to fill by delaying payment to the state employee’s retirement fund. This practice will continue in the 2011 and 2012 fiscal years when the budget defers $620 million from the retirement fund.
“I think such actions like this are bad long-term policy for our state and for our state employees,” McDonnell said. “While our deferral was far less than those of many other states, that were in the billions of dollars, it is still a significant amount of money that must be paid back.”
The General Assembly approved the two year budget for fiscal years 2011 and 2012 with no general tax increases, but cut millions from health care and education programs. Several fees will also boost the revenue.
For now, the governor called the budget surplus a “ray of sunshine,” but acknowledged his administration and the economy still had significant ground to make up.
“I think he was appropriately optimistic,” said Del. Lynwood Lewis, D- Accomac. “I think he was quick to point out, and rightfully so, that much of this surplus is already dedicated. We went through a terrific economic crisis and things are still uncertain.”
