Big share of state surplus came from agency savings

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More than 40 percent of Virginia’s recently announced $403.2 million budget surplus came from savings by state agencies, Gov. Bob McDonnell said today.

Appearing at a joint meeting of the General Assembly money committees, the governor said state employees were able to save nearly $175 million rather follow the common government practice of spending down their budgets at the end of the fiscal year.  In addition to that money, the state collected $228.5 million more in tax revenue than expected.

The surplus will permit the state to give employees a one-time, 3 percent raise on Dec. 1, their first pay increase since November 2007. “What this result shows us is the power of economic incentives,” McDonnell said. “This notion of gain sharing or economic rewards for getting results is a concept widely used in the private sector and long overdue in practice and implementation with state government operations.”

The pay raise will account for $82.2 million of the surplus. Another $36.4 million is required by law to be deposited in the Virginia Water Quality Improvement Fund for use in cleaning up the Chesapeake Bay. A law passed in the 2007 General Assembly session, HB 3202, will designate another $32.7 million for transportation purposes and $16.3 million for nonrecurring expenditures.

The preliminary balance sheet for the fiscal year that ended on June 30 showed cash-equivalent assets of $872.9 million in the general fund. All but $71.2 million of that total is already committed. The governor has until Nov. 1 to decide how the extra money will be used.

In addition to rising general funds, revenues in the separate Commonwealth Transportation Fund exceeded predictions by $64.4 million. Most of the growth was due to sales taxes from increasing auto sales. New car sales, for example, rose 4.2 percent during the last fiscal year year after falling 27.5 percent the year before.


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