McDonnell’s proposed budget steers money to jobs, transportation, higher ed

RICHMOND — Virginia Gov. Robert F. McDonnell proposed Monday shuffling millions of dollars from public schools and health care to his top priorities of pension reform, higher education and transportation.

McDonnell (R), unveiling his first state budget, proposed saving nearly $1 billion in a variety of ways, including withholding inflation increases for Medicaid and K-12 education, making state agencies more efficient and closing an aging prison.

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He did not propose higher taxes, but he did recommended collecting $22 million in higher Department of Motor Vehicles fees, restaurant inspections and increased employer payments to the unemployment compensation trust fund.

In his annual speech to the General Assembly’s money committees, McDonnell told legislators that although revenue continues to grow, Virginia needs to be vigilant as it begins to recover from the worst recession since the Great Depression.

McDonnell, one of the nation’s most popular governors and a possible vice presidential contender, hopes to use his two-year budget to reshape Virginia’s government and leave a lasting mark on the state.

“We should not subscribe to the theory that government can only get better if it gets bigger,’’ McDonnell told a room of legislators, lobbyists and state employees. “I believe that government must get more focused and effective.”

The General Assembly will consider his budget recommendations when it returns for its annual legislative session Jan. 11. Legislators have the power to completely overhaul or ignore his $85 billion, 483-page plan.

McDonnell’s chances of getting his plan passed have improved because Republicans control the House and split the Senate with Democrats, with Lt. Gov. Bill Bolling (R) having the power to break tie votes. Democrats said they will challenge Bolling’s authority to vote on the budget.

In Northern Virginia, officials cheered the restoration of $25 million of a $120 million cut over two years in aid to localities but worried about a $65 million reduction in funds to woo school employees in a competitive, expensive market. “It’s a huge hit to all of Northern Virginia,” Del. David L. Englin (D-Alexandria) said.

McDonnell’s 60-minute speech touched so lightly on his proposed cuts that some were confused about how he would pay for it all.

“As I walked out of the room, I got grabbed by a number of people who said, ‘Where are the cuts?’ ’’ said Michael Cassidy, president of the Commonwealth Institute for Fiscal Analysis.

McDonnell made his deepest cuts in Medicaid, saving $259 million by not adjusting hospital payments for inflation. But the budget does not cut Medicaid provider rates, as some had feared.

The governor wants to add $110 million to ease clogged roads by boosting the portion of the sales tax spent on transportation. Democrats say that will take money away from education and other core services, but Republicans praised the approach.

“The governor has been a great ally in the fight for common-sense fiscal solutions, low taxes and budgetary prudence for many years,” House Speaker William J. Howell (R-Stafford) said.