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Tax collections help build $404 million surplus in Va.

By Anita Kumar
Washington Post Staff Writer
Wednesday, August 18, 2010; B01

RICHMOND -- Gov. Robert F. McDonnell will announce Thursday that Virginia ended the fiscal year with a surplus of about $404 million -- almost twice the previous estimate, state officials said.

About $229 million was generated through tax collections, lawmakers said, and the rest through state agencies' unspent balances.

McDonnell (R) will also announce how the money will be spent, including $82.3 million for a 3 percent bonus for state employees, $18 million for education, and $35 million to $40 million each for roads and Virginia's Water Quality Improvement Fund, which is used for the Chesapeake Bay cleanup, said Robert Vaughn, staff director for the House Appropriations Committee. State employees have not received a raise since November 2007.

"It's good news,'' said Robley S. Jones, director of government affairs for the Virginia Education Association, which represents teachers. "We hope that in the long run they'll look to restore deep cuts for K-12."

McDonnell will make the announcement in his annual speech to the House Appropriations and Senate Finance committees, scheduled for Thursday morning. McDonnell declined to comment Tuesday afternoon.

Sen. A. Donald McEachin (D-Richmond) said he does not consider this week's announcement a reason to celebrate.

"This is not a surplus,'' he said. "We balanced our budget on the backs of schoolchildren and those who need mental-health care."

McEachin encouraged McDonnell to use the funds to reverse some of the massive cuts to education and mental health or make payments to the Virginia Retirement System for public employees.

Most of the money from tax collections -- $220 million -- was announced in July. But the unspent balances were unexpected.

"It's wonderful news. Through efficiencies, we have done what businesses have been doing for months and months,'' said Del. S. Chris Jones (R-Suffolk), a member of the House Appropriations Committee and a small-business owner. "I'd be very cautious to spend any of the surplus until I get a few more months under my belt. I'm not going to get carried away."

Colleges and universities that did not spend all their funds are allowed to keep their balances if they achieve certain management standards, Vaughn said. But McDonnell can recommend to the General Assembly how to spend other money.

"Everybody has a wish list," said House Majority Whip M. Kirkland Cox (R-Colonial Heights). "It's going to be a battle."

The General Assembly closed a $4 billion shortfall when writing the $78 billion two-year budget for fiscal 2011 and 2012 with no general-tax increase but did include several fees and hundreds of millions in cuts, including to health care, schools and public safety.

Cox said state officials might want to keep the money in reserve or consider making a larger payment to the Virginia Retirement System, which the state delayed doing when legislators wrote the budget.

In July, McDonnell announced the $220 million surplus, making Virginia one of at least 10 states that had reported finishing the fiscal year in the black.

The revenue outlook was brightened largely because of higher individual and corporate income-tax withholdings, signs of a stabilizing economy. Revenue dropped just 0.6 percent instead of the projected 2.3 percent.

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