RICHMOND – For the first time since 2006, black – not red – will be the fiscal color of choice for the upcoming budget season in the state capitol.
State revenue is on pace to beat projections this fiscal year and that means Virginia lawmakers will not have to make major budget cuts when they convene in mid-January, unlike the past two General Assembly sessions.
Despite the rosier budget news, decisions over funding for major programs and initiatives will still be challenging and contentious in the coming months.
Lawmakers received an updated revenue forecast that paints a brighter outlook for the coming calendar year. They also heard Gov. Bob McDonnell’s formal budget proposal during a joint session of House and Senate finance and appropriations committees on Dec. 16.
“Revenue has gone up slightly, and that is a ray of good news for us. But that doesn’t mean we shouldn’t find cuts,” McDonnell cautioned lawmakers.
Still, the more positive outlook was welcomed by one of Loudoun’s lawmakers.
“Having to trim $200 to $300 million compared to $4 billion last year seems manageable,” state Senator Mark Herring (D-Loudoun) told the Times-Mirror last week in an interview.
Since March, sales tax and income taxes receipts have come in above estimates, and revenue is expected to exceed estimates through June 2012, Secretary of Finance Ric Brown told lawmakers.
Sales tax and income tax revenue fund more than three-fourths of the state’s $15-billion general fund. Another $17 billion is spent each year in other funds that tap other revenue streams, Brown said.
Through November, total revenue has increased 4. 7 percent, Brown said.
For the current 2011 fiscal year, which runs through June, revenue was expected to increase just 2.6 percent, but state officials now predict revenue will increase 3.5 percent. And revenue could increase as much as 5 percent in 2012, Brown said.
Officials expect rising revenue to pump an additional $146.9 million into the general fund through June plus another $190.1 million in the 2012 budget year, which begins in July.
In comparison, the state saw revenues drop by $14 million last year, according to Brown’s report.
During the past two General Assembly sessions, legislators had to cope with making millions in cuts, which pushed spending to 2006 levels, McDonald said.
That won’t be the case when the session begins in January, he said.
Despite the brighter financial picture for the Commonwealth, McDonnell said his office proposed a somewhat conservative budget because of signs that the economy will remain weak in the coming year or two. He said state officials still should find ways to cut spending and urged them to enact the recommendations of his reform committee.
McDonnell recommended a combined $191 million in cuts and savings based on recommendations from the Governor’s Commission on Government Reform and Restructuring.
But many of those dollars will be reallocated to other spending priorities and not eliminated completely from the budget, Brown said.
After the governor’s speech, legislators grilled Brown and other senior staff about specific aspects of the budget proposal including changes to the pension plan, how to pay for transportation projects and the Commonwealth’s debt load.
Currently, the state pays about $1 billion a year to repay debts, and the governor is seeking to borrow additional money to pay for roads and for an institution for sexually violent predators, Brown said.
The topsy-turvy whipsaw of annual budget planning from the past decade in Richmond has some lawmakers wondering if a new approach is in order.
Herring told the Times-Mirror last week that he plans to introduce legislation to reform the budget process. His bill would require the governor and General Assembly to take into account the long-term effects of budget and spending decisions.
Currently, Herring said, most budget decisions are made in two-year cycles. By law, the governor must issue a statement about the upcoming four-year period by budget category.
However, he added that the announcement usually is more of a straight-line statement about the budget – a practice the lawmaker wants to change.
“It’s important for the governor and General Assembly to have a long-term view of the budget and decisions,” said Herring.
- Additional reporting by Times-Mirror Staff Writer Nicholas Graham
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