With budget surplus, Virginia lawmakers seek to restore retirement, sales tax policy

By Anita Kumar
Washington Post Staff Writer
Friday, August 20, 2010

RICHMOND -- Even before Gov. Robert F. McDonnell officially announced Virginia's $403 million budget surplus Thursday, members of both parties had begun to urge him to use the money to reverse two accounting maneuvers used to close this year's state budget that many describe as gimmicks.

The state delayed paying $620 million to its retirement system and required retailers to pay sales tax a month early, allowing the state to receive the money in an earlier fiscal year.

"Before we rush to spend any surplus, we should first put our fiscal house in order," Del. Ben L. Cline (R-Rockbridge) said. "These creative accounting maneuvers may have helped to technically balance the budget, but they have frustrated taxpayers and slowed business growth in the commonwealth."

In Richmond, where the General Assembly is often divided, it was a rare moment of bipartisan agreement.

"A balanced budget and responsible stewardship of taxpayer dollars requires money in to equal money out, without gimmicks that cook the books and risk our future finances," Del. David L. Englin (D-Alexandria) said.

As expected, McDonnell told legislators that Virginia ended the fiscal year June 30 with a surplus of about $403.2 million -- almost twice the previous estimate.

Much of the money is committed: $82.2 million for a 3 percent bonus for state employees; $60.4 million for roads; $36.4 million for the Water Quality Improvement Fund, which is used for the Chesapeake Bay cleanup; $18.7 million for education; and $9.3 million for snow removal.

An additional $100 million or more came from state agencies, including colleges and universities that did not spend all of their money and are allowed to keep their balances.

McDonnell (R) has until Nov. 1 to recommend to the General Assembly how the state should spend the remaining $87.5 million.

The governor, in his annual speech to the House Appropriations and Senate and House finance committees, said he does not favor borrowing money from the retirement system or forcing retailers to pay sales tax early. But, he said, he does not credit either of them with the small surplus the state had last year. Instead, he said, about $228 million was generated through tax collections, and the rest through state agencies' unspent balances.

McDonnell told reporters later that he is thinking about spending the money on transportation, the retirement system or something else.

"I think most people would say education, public safety and transportation are core functions of government," he said, "and to the degree there are discretionary funds available, that should be a priority.''

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