RICHMOND — Balancing Virginia’s current fiscal strength against uncertainty in Washington, Gov. Robert F. McDonnell is proposing state budget amendments that would give teachers raises, devote more general fund revenue to roads and sock away nearly $130 million in the state’s rainy day fund.
McDonnell (R) appeared before the General Assembly’s Joint Money Committee on Monday to pitch a mix of spending increases and cuts from the two-year, $85 billion budget that the state has been operating under since July 1.
He said he wants to spend $48 million in general funds on transportation in 2014, ramping that up to $275 million a year by 2018. He also used the occasion to say, as he has before, that he does not intend to expand Medicaid under the federal health-care law.
McDonnell said his amendments would keep the commonwealth on solid financial footing even as Washington teeters at the edge of the “fiscal cliff.”
“The budget amendments that I am presenting today reflect the core priorities of government and our administration,” he said. “They recognize the realities of this economy and the looming uncertainty that budget gridlock in Washington and the fiscal cliff are having on our economy. Yet they look forward to building upon our legacy of conservative and sound budget decisions to lay the groundwork for the future of our great commonwealth.”
McDonnell has a modest windfall to work with, with revenue over the 2013-14 biennium projected to come in nearly $220 million higher than forecast. But the governor nonetheless has a fairly ambitious plan to reshape the state spending plan.
Beyond suggesting how that projected surplus should be spent, McDonnell proposes $524 million in spending cuts. Pooling those cuts with the surplus, he would increase spending on his priorities by $736 million.
At the top of his agenda is transportation. With the state projected to be out of road money by 2017, McDonnell announced in early December that he was working on a plan to generate at least $500 million a year for transportation by 2018.
Although the plan remains under wraps, it became clear Monday that its financial underpinnings are something he has tried before: A substantial chunk of the money would come from sales tax revenue, a plan McDonnell tried and failed to get past the General Assembly last session.
McDonnell told the committee that he wants to increase the amount of sales tax revenue dedicated to transportation from 0.5 percent to 0.55 percent, generating $48 million for roads in 2014. During a later gathering with reporters, McDonnell went further, saying he wanted to gradually raise that to 0.75 percent, generating $275 million a year by 2018.
Democrats characterized that as a raid on the general fund in the last session, saying the money should be preserved for education, health care and other “core” functions of government. On Monday, Sen. Janet D. Howell (D-Fairfax) said that her position is unchanged.
“The Senate Democrats have been consistently opposed to that,” she said. “We need to look at all the options and make sure the public understands what would be lost if we were to do that in terms of teachers’ salaries, in terms of public safety, in terms of mental health programs.”
But McDonnell, whose amendments include money for teacher raises and expanded mental health programs, said that transportation is a core function of government. He noted that general funds have been used for roads four times in the past decade.
“I categorically reject any contention that you can’t use general funds for transportation,” he said.
McDonnell said he would not expand Medicaid, the health-care program for the poor, disabled and elderly nursing-home residents. The federal government has promised to initially pick up the full tab for expanding enrollment, shrinking its share to 90 percent by 2020. McDonnell said he does not think the federal government can achieve that.
Democrats said McDonnell was leaving federal money on the table.
“We have a working-poor population here in Virginia, and I think it was an opportunity that we’re missing,” said Del. Charniele Herring (D-Alexandria), chairwoman of the Democratic Party of Virginia.
Among McDonnell’s amendments is a proposal to save $12.2 million by eliminating “cost of competing” funds for school support staff in the second year of the budget. The funds usually are provided to Northern Virginia schools to help them attract staff in that expensive job market.
During the budget process this year, McDonnell had wanted the funds included for teachers but not support staff. But the General Assembly included the $12.2 million against his wishes.
McDonnell would spend $58.8 million to provide teachers with a 2 percent raise and $15 million to offer merit pay to teachers. Both are part of an education reform package that would also make it easier to fire teachers. McDonnell proposes investing an additional $30 million in higher education.
McDonnell also proposed $58.8 million in cuts to state agencies. Details on the reductions were not immediately disclosed, but they include closing a juvenile correction facility in Hanover.
One area of savings is painless: McDonnell reaped $30 million by restructuring some debt with more favorable interest rates.
Some of the governor’s spending proposals reflect his concern that the commonwealth, which rode out the recession with relative ease thanks to its concentration of military installations and defense contractors, could be in for tougher times. Virginia would be particularly hard hit if Congress and the White House fail to reach a budget deal by Jan. 1, triggering defense and domestic spending cuts .
McDonnell wants to plow $128 million into the state’s rainy day fund. He also wants to provide nearly $70 million to shore up the state employee health insurance program.