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 The grim outlook for a state that has thrived fiscally in recent
years comes days before the legislature begins finalizing a $96
billion proposed budget for the next two years. Budget committees in
both chambers are expected to release their spending plans for
Virginia on Sunday.
In a news release posted late Wednesday, McAuliffe, a Democrat who
took office last month, said total revenue fell 5.9 percent in
January, with declines in all major tax sources except corporate
income tax. Through January, the fiscal year-to-date revenues are
down 0.5 percent, compared with forecasts for 1.7 percent growth.
McAuliffe said January is a significant month for both individual
estimated tax payments and sales taxes collected from December
purchases, which makes the report a harbinger of future fiscal
struggles.
"In order to remain prudent, we must adjust our revenue estimates
downward, which will reduce future risks," he said, adding that he
was recommending lowering the forecasts by $125 million for fiscal
2014, ending on June 30, and by $15 million for fiscal 2015,
starting July 1.
McAuliffe said that in a meeting with state budget leaders he
suggested scrapping a $59.9 million payment to the state's revenue
stabilization fund because the deposit was contingent on revenue
growth in fiscal 2014.
On the other hand, lottery revenues will likely surpass forecasts by
$15.5 million, which can be used to cover public school costs in the
state's budget, he said. In the same vein there are balances from a
former state agency that can be deposited into the general fund,
along with unclaimed funds for other programs.
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When he left office in December, former Governor Robert McDonnell
set aside $51 million, the state's largest unappropriated balance
since 1991, to provide spending flexibility. McAuliffe said the
state should draw $40 million from that balance.
Virginia steamed through the 2007-09 recession with few economic
problems because of its proximity to the nation's capital. Along
with being home to a multitude of federal workers and contractors,
the state is the site of many military installations.
Automatic spending cuts known as sequestration and a congressional
budget fight at the end of 2013 caused the local economy to soften,
and Virginia's budget is now hurting. Last year, revenues fell in
February, March, August, and October.
Nonetheless, the state enjoys a triple-A rating from Moody's
Investors Service, which gave it a stable outlook in July.
(Reporting by Lisa Lambert; editing by Jonathan Oatis)
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