By Anita Kumar and Rosalind S. Helderman
Washington Post Staff Writers
Friday, December 17, 2010; 9:04 PM
RICHMOND - Virginia Gov. Robert F. McDonnell proposed Friday to use higher-than-expected revenue and $192 million in savings for his top policy priorities: job creation, transportation and higher education.
In his annual speech to the General Assembly's money committees Friday, McDonnell (R) told legislators that the state's economy is growing at a pace slightly better than expected, allowing him to raise Virginia's financial forecast by $283 million over the next two years.
As a result, he announced more new spending than cuts for the first time in years while releasing amendments to a still-lean two-year budget over the last week.
They include down payments on some of McDonnell's top priorities, which focus heavily on economic development, substantial funding to shore up the state's pension system, as well as goodies for pet projects, including $500,000 for the state's food banks and Operation Smile. Proposed cuts include a hit to social services for children, reduced advertising for the lottery and the elimination of state funding for public broadcasting.
"Government must set priorities, encourage cost savings and frugality, fund core functions of government well, set the right climate for job creation and economic development, and then, basically, get out of the way," McDonnell said to a standing-room-only crowd on Capitol Square.
He took lawmakers and college presidents by surprise by stripping nearly $17 million in funding for Virginia Commonwealth University after it raised tuition 24 percent this year. Other schools increased tuition by nearly 10 percent.
The father of five, including three at Virginia public universities, said he hopes his decision sends a message to the rest of the state's schools that they can no longer dramatically increase tuition and fees. "It's leaving our kids with a decade of debt when they get out," he said. "This will certainly be a good message to our higher-education institutions that need to govern their tuition rates accordingly."
VCU President Michael Rao said in a statement that McDonnell's decision "directly affects" the school's ability to provide a quality education and ensure that students graduate on time.
"VCU has cut costs to the bone over the past several years, so much so that the reductions undermined the quality of instruction," he said.
Sen. Mary Margaret Whipple (D-Arlington) called McDonnell's decision "shocking," noting that VCU enrolls mostly in-state students, unlike other universities, which can offset costs with large numbers of out-of-state students who pay higher tuition. "They offer a great education, but you can't offer it for nothing."
McDonnell recently unveiled a plan to provide a stable funding source for schools so they can avoid such dramatic tuition increases by providing them financial incentives to fulfill such goals as graduating more students in four years.
He is asking legislators to approve spending $58 million next year toward his education plan, which includes awarding 100,000 new associate and bachelor's degrees over the next 15 years through financial aid, grants to virtual schools and other programs.
McDonnell proposed spending $54 million for economic development, including $25 million for a research and technology innovation fund and money for small businesses, tourism, tax credits and the film industry.
And he wants to spent $150 million from last year's budget surplus on roads and bridges while borrowing $2.9 billion over the next three years for transportation.
Sen. R. Edward Houck (D-Spotsylvania) said he is uncomfortable with spending money from the state's general fund on transportation at the expense of education, social services and public safety.
"What's needed is a sustainable long-term funding source," he said. "We've had this debate for years, but of course in today's political climate, that's very difficult to achieve, particularly in an election year."
All seats in the legislature will be up for election in November.
Against that political backdrop, McDonnell has proposed several major structural changes to government, which would come with substantial price tags.
He said state agencies have not been paying for all of the information technology services they have been using, requiring Virginia to spend $58.3 million more over the next two years. The state is already paying billions for such services as part of a troubled technology overhaul contract with Northrop Grumman.
He said the state needs to make major new investments to deal with growing numbers of sexually violent criminals who are civilly committed after completing their criminal sentences - $24 million to staff the program and $43.5 million to build an additional facility to house such people.
And on Thursday, he proposed that state employees contribute 5 percent of their salaries toward their retirement fund for the first time in 27 years. The state had agreed to take on employees' pension contributions in 1983 in lieu of a raise. He proposed a 3 percent raise to partially offset the deduction and promised that workers would receive a 2 percent bonus next year if the state ends the fiscal year able to afford it. But he acknowledged that the result could be a painful 2 percent pay cut for employees. The change is necessary, he said, to ensure the retirement fund's long-term solvency.
Some Democrats have already blasted the proposal as breaking faith with longtime employees, who have already gone four years without a raise. It would affect 89,000 state workers. The proposal would also allow local governments to ask 130,000 teachers to make the 5 percent payment as well, provided they also receive a 3 percent raise.
Some of McDonnell's most significant cuts would come in funding for social-service programs for 1,400 at-risk children. He proposed eliminating services to those who have gone through the juvenile justice system and those who are mentally ill, saving the state $5 million. Children in foster care and special education would still be served.
Legislators adopted a two-year, $78 billion budget in the spring that cut millions from education, health care and public safety - curtailing state spending more aggressively than any in generations. But by June, Virginia ended the fiscal year with a surplus of about $404 million.
The General Assembly will consider changes to the state's two-year budget when it returns for its annual legislative session Jan. 12.
McDonnell's amendments are a blueprint for changes, but legislators have the power to completely overhaul or ignore the recommendations.