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Governor says budget retains core functions and positions state for future without raising taxes

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Print this page By Catherine MacDonald

Gov. Bob McDonnell’s 2012-2014 budget, released Monday, would increase spending for transportation, higher education and the state’s pension system, without raising taxes. Instead, nearly $800 million in cuts would come primarily from health care, public schools and a pre-kindergarten program. “This is not a status quo period in Virginia history, thus, this is not a status quo budget,” McDonnell said. “This budget prioritizes spending, ideas and policies that promote job creation, economic development and entrepreneurship.”

In the first two-year budget of his administration, Medicaid, the health care program for low-income Virginians, faces one of the most significant hits under the $85 billion spending plan. By not increasing the Medicaid reimbursement to hospitals and nursing homes to account for inflation, Virginia would save nearly $324 million.

Public schools also would be deprived of adjustments for inflation — for them a loss of $109 million geared toward maintenance and utilities. In addition, McDonnell’s budget would not replace $108 million in federal stimulus funding schools received in the current budget. Public education would receive $438 million in net new funding, with the expectation that most of the funds would go into instruction and teaching resources. 

Other cuts include the elimination of public broadcasting funding, which would result in $7.2 million in savings. Another $84 million would come from agency reductions, including layoffs expected to affect about 300 state workers.

The budget’s big ticket item would be a $2.2 billion infusion for state employee and teacher retirement costs, the strongest employer funding of the Virginia Retirement system in the state’s history. McDonnell also proposed $200 million in new funding for higher education, with much of it supporting science, math, engineering, technology and health care curricula.
McDonnell’s plan recommends increasing the percent of the sales tax dedicated to transportation to .55 percent,  a boost his office estimates would generate more than $110 million for the industry over the next two years.

Although $100 million has been approved by the legislature to promote economic development in the commonwealth, McDonnell wants an additional $40 million to promote job growth and industry. He also would add $20 million to an existing fund —  for a total of $50 million — to insulate Virginia from anticipated federal defense cuts.The governor also seeks to build up cash reserves as a cushion against adverse economic events by leaving an unappropriated balance of $31.4 million, significantly more than the $5 to $10 million typically left on the bottom line. He alsosaid that the Rainy Day Fund should double in size by the end of fiscal 2014 with continued revenue growth, to more than $600 million.  According to the governor, general fund revenues are expected to grow 3.3 percent in fiscal year 2013 and 4.5 percent in fiscal year 2014.

Overall, McDonnell said his budget helps solve big problems “like our near broken pension system, an underfunded transportation infrastructure system, and a higher education system in which tuitions have doubled in the past ten years. And it builds up cash reserves and liquidity as insurance to provide us flexibility … and to ensure that we maintain Virginia’s cirtically important AAA bond rating.”


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