McAuliffe announces plan to balance FY2016-2017 budgets

terry mcauliffeGovernor Terry McAuliffe announced his actions to balance Virginia’s Fiscal Year 2016-2017 budgets in response to a revenue shortfall. The Governor’s plan reduces spending while protecting core priorities like education, public safety and health care.

“The budget actions we are taking today respond to the Commonwealth’s revenue shortfall without making program cuts to core priorities that are essential to our efforts to build a new Virginia economy,” said Governor McAuliffe, speaking at the announcement today. “There will be no program cuts to public education, Medicaid for our families most in need, nor our core public safety services. We did not kick our budget problems to local governments by reducing payments to cities, counties or towns. These are obviously difficult decisions to make and there may be more to come, but I am confident that the progress and investments we are making today will put Virginia on course for strong growth well into the future.”

Total general fund revenues rose by 1.7 percent in fiscal year 2016, for a total of $18 billion, but fell short of the official forecast of 3.2 percent growth by $268.9 million. The majority of the shortfall was due to withholding and sales tax collections. In addition, transfers to the general fund fell $10.4 million short of the forecast. The combined shortfall including general fund revenue and transfers in fiscal year 2016 totaled $279.3 million.

“The Governor asked us to create a proposal based on a coherent and sound framework of fiscal principles, that would not sacrifice any of gains we have made building the new Virginia economy,” said Secretary of Finance Ric Brown. “This new plan ensures that Virginia will maintain its reliable reputation as a fiscally responsible state whose leaders work together when they are confronted with budget challenges.”

In order to reach the intended budget goal the administration implemented three primary strategies. First, the state budget contained an automatic trigger based on the revenue forecast that removed $125.1 million for pay increases. Second, there is a proposal to transfer $392.3 million from the revenue stabilization fund, as permitted by state law. Third, there are pledges from state agencies in 2016 that provide an additional $23.5 million in savings.

The administration also will use $43.3 million in additional unspent fund balances from the end of fiscal year 2016 to help close the shortfall and will reduce operating expenses in the current fiscal year, with exemptions for core services like education, health care, and public safety, resulting in savings of $73 million.

Lastly, a variety of other revenue actions were taken to reach the goal. They include a suspension in changes to the accelerated sales tax program, transfers of lottery revenues for public education, and the use of Literary Fund revenues to offset teacher retirement costs.

To view the full Governor’s savings plan, please visit the Department of Planning and Budget’s website here.

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