* Governor wants $50 million for rainy day fund
* Also seeks funds to help local governments
By Lisa Lambert
WASHINGTON, Dec 17 Virginia's governor suggested
on Monday making small changes to the state's biennial budget,
asking the legislature to bump up spending only slightly due to
risks posed by the federal government's "fiscal cliff."
"While the economy has expanded for 13 consecutive quarters,
the pace of the expansion has been quite modest and slower than
traditional recoveries," Gov. Bob McDonnell told legislators.
"We cannot predict what new tax policies or spending cuts a
federal plan will contain, and if it will even be agreed upon
before our nation goes over the cliff in 14 days."
At the start of 2013, a series of federal tax increases and
spending cuts are slated to begin. President Barack Obama and
House of Representatives Speaker John Boehner are negotiating
ways to avoid the so-called "fiscal cliff," which economists
warn will push the country back into recession.
But as prospects for a comprehensive solution dim, many
states are worrying about how they will manage a cold plunge of
austerity accompanied by a potential spending drop from
consumers and businesses coping with higher tax bills.
A handful of states that rely on the U.S. government for
jobs and contracts are particularly concerned about the spending
cuts - Virginia perhaps most of all. The state is home to many
federal employees as well as military installations.
Virginia foresees taking in $219.6 million more in general
fund revenues from balances, transfers and taxes than originally
budgeted for the current 2012-2014 biennium, Finance Secretary
Ric Brown said.
Over that two-year period, the state now expects $34.39
billion in total general fund revenues, compared to the $34.17
billion in its initial forecast.
Virginia passes biennial budgets that it adjusts during the
two years through amendments.
In the current fiscal year alone, revenues are now expected
to increase 3.6 percent from last year to $16.42 billion,
according to Brown's office. They were originally budgeted to
rise only 2.9 percent.
The governor suggested putting part of the small windfall,
$50 million, into the rainy day fund.
That suggestion and other measures McDonnell proposed
"provide us with a little flexibility in 2014 if we face adverse
federal actions coming out of Washington," Brown told a
conference call with reporters, adding the state is relying on
highly conservative economic and revenue outlooks.
By almost any metric, Virginia is in better shape than other
states, with its 10.7 percent poverty rate below the national
14.3 percent and its median household income of $63,302 above
the national median of $52,762.
In October, its unemployment rate was 5.7 percent, well
below the U.S. jobless rate and also its 6.2 percent rate a year
before. According to a recent report from the National
Association of State Budget Officers and the National Governors
Association, Virginia's workforce has grown over the last three
years and its collections of sales and income taxes have
consistently beat forecasts each of those years as well.
Nonetheless, rating agencies have pointed to Virginia's
federal dependency as a possible shortcoming.
Fitch Ratings, which gives Virginia its highest general
obligation rating of "AAA," recently noted that "some reductions
in government sector employment over the next few years are a
risk as the federal government contracts."
Struggling to recover from the 2007-09 recession, many
states have hacked away at local aid. McDonnell, on the other
hand, suggested sending Virginia's local governments an extra
$45 million. He would like to add $2.1 million to the salaries
of public attorneys, and spend $7.5 million to help offset the
local effects of closing military bases as well.
He is also asking to dedicate $64.4 million toward state
employee health insurance. Healthcare costs, especially for the
Medicaid insurance program for the poor, are rising fast and
threatening to swamp their budgets. According to last week's
report from NASBO and NGA, Virginia is spending $298.8 million
more on Medicaid this fiscal year than last.
The Republican governor is also seeking funds to help with
water improvement, asking the legislature for $200 million for
water quality bond projects for places such as Richmond. And he
would like to increase education spending for all levels,
including putting $3.9 million into university operations.