Tuesday, July 19, 2011

Virginia posts $311 million revenue surplus for fiscal year 2011

RICHMOND – For the second straight year, the Commonwealth of Virginia has reached the end of the fiscal calendar in the black. Governor Bob McDonnell announced today that the state concluded Fiscal Year (FY) 2011 with an approximately $311 million surplus from general fund revenue collections and transfers. Total revenue collections rose by 5.8% in FY 2011, well ahead of the revised revenue forecast 3.5% growth. The main drivers of the revenue increase were growth in individual income tax receipts from both payroll withholding and non-withholding, key economic indicators.  A comprehensive breakdown of the FY 2011 revenue surplus is attached to this press release.

The final FY 2011 surplus number will be adjusted upward in the month ahead after the addition of final tabulations of savings recognized through greater operational efficiencies and incentives to control spending throughout state government. In FY 2010 the revenue surplus for the year was $228 million. The final FY 2010 surplus, including savings, was $403 million. The final surplus figure for FY 2011 will be released in August. The governor made today’s announcement at an afternoon press conference at the Patrick Henry Building on Capitol Square in Richmond. He was joined by Lieutenant Governor Bill Bolling and Secretary of Finance Ric Brown. It’s the second fiscal year in a row that Virginia has concluded the fiscal year with a revenue surplus. This is also the first year since 2008 that there has been actual revenue growth over the previous year.
“The great challenge of our time is getting our economy back on track, putting our people back to work, and getting our fiscal houses in order at the local, state and federal levels,” Governor McDonnell said. “For too long, elected officials from both parties have overpromised and overspent, and the result is the fiscal crisis we see unfolding in Washington D.C. Here in Richmond, we are committed to implementing a culture of fiscal responsibility and restraint in our state government. Working together, Republicans and Democrats have made some very tough choices. We have reduced spending, not raised taxes and focused government on its core functions. As a result, we have seen back-to-back years of revenue surpluses. The Commonwealth, like our families and businesses, is living within its means.”
The governor continued, “Many factors have led to this surplus. We have budgeted conservatively and we have kept taxes low. Additionally, our targeted investments in job-creating programs in the areas of economic development, transportation and higher education, along with our strong Right to Work law, pro-business environment, and commitment to keeping litigation and regulation to a minimum, have continued to make Virginia more and more attractive to job-creating businesses. Our unemployment rate has now fallen to 6 percent, the third-lowest rate east of the Mississippi, and more Virginians are working again. As Virginians work and spend, it translates into increases in incoming revenues to the Commonwealth. State government must continue to do its part to control spending and look for new opportunities to innovate, restructure and save taxpayer dollars. We still have much work to do before we are completely out of this tough economic period, and unfortunately federal issues continue to threaten the positive advances we are making in the states. It is great to see revenue growth return to the Commonwealth after 2 years of declining general fund revenue collections. Clearly the bipartisan effort in Richmond to rein in spending and rev up the private sector is producing positive results. Despite the positive news, no one should believe Virginia’s fiscal challenges are over. Virginia faces massive unfunded federal mandates of over $10 billion in environmental, health care and mental health requirements and significant unfunded state liabilities in the unemployment insurance system and state retirement system.
Lieutenant Governor Bill Bolling added, “Needless to say, we are delighted to have closed the most current fiscal year with a $311 million revenue surplus.  This surplus, in addition to last year’s budget surplus, means that we have enjoyed total budget surpluses of more than $700 million during the first two years of our Administration.  This is a very positive result, which is much better than most states in the nation.  It is a significant improvement over where we were when we took office.  While we can be pleased with the success we have enjoyed in getting the Commonwealth’s financial house back in order, we will continue to face significant budget pressures in the years to come, most significantly the uncertain economic environment on a national basis.  Therefore, we must continue to be frugal with how we spend the taxpayer’s money, and we must direct those resources we have to the state’s highest priorities and to addressing some of the structural challenges we face in other areas, such as VRS.  If we continue to exercise fiscal discipline and focus on creating jobs and growing our economy, I am hopeful that we will continue to experience positive economic news such as this in the future.”
At today’s press conference, Secretary of Finance Ric Brown detailed the sources of the surplus funds and where they will be directed.  The overwhelming majority of the revenue is obligated to predetermined areas of the state budget due to the Virginia Constitution and state law which governs revenue allocation in the event of a surplus. Governor McDonnell will also direct funds to shoring up the Virginia Retirement System as part of his ongoing effort to reform and improve Virginia’s pension system to ensure its long-term viability.
Disbursement of FY 2011 Revenue Surplus (All numbers are approximate and subject to revisions):
$146.6 million: Revenue Stabilization Fund Deposit from FY2011 Surplus (Subject to Final Audit)
$32.2 million: Water Quality Fund
$23.0 million: Pay Transportation for its Share of the Accelerated Sales Tax
$8.9 million: Interest on Unemployment Compensation Trust Fund Due to Federal Government
$4.3 million: Tornado Relief
$7.5 million: For Base Realignment and Closure (BRAC) Obligations
$7.4 million: Supplemental Public Safety Funding for Sheriff’s Offices
From Remaining Funds:  Additional Contributions to the Virginia Retirement System to Help Ensure Long-Term Viability and Stability of the System and to Transportation Infrastructure

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