Virginia's practice of keeping some funds in private bank accounts that bear no interest is costing the state millions of dollars in potential revenue, a Norfolk newspapedr reported yesterday.
The state lost about $6.4 million the past year because it allowed some $54 million in government funds to sit "idle" in accounts that paid no interest, according to the Norfolk Ledger-Star.
The article said Gov. John N. Dalton and former Gov. Mills Godwin Jr. increased the state's use of noninterest-bearing accounts after former governor Linwood Holton -- who had cut such deposits in half -- left office in 1974.
Holton, noting that banks are free to invest the funds for their benefit and reap a profit, told the newspaper that favoritism toward private banks is traditional in Virginia's government.
"Governors and legislators alike use the state deposits to carry favor with the banks," Holton said in an interview with the newspaper. "Banks and politicians have been traditional partners in Virginia."
Charles B. Walker, Virginia's secretary of administration and finance, said yesterday he had not seen the newspaper article but knew from the figures used that "it's an incomplete statement . . . a reporters "view of money management."
Walker disputed the $54 million figure while acknowledging that $3 million to $4 million in state funds are in various regional banks that pay no interest on the accounts.
"It's a matter of how quickly you transfer it out," said Walker, who added he makes financial investments for the state "every day" that more than offset losses from the idle funds accounts.
Walker said the newspaper may be mistaking for idle funds money that is sitting temporarily in accounts "to cover checks that are already on their way to the bank."
He said his office commissioned a study last year on ways to speed up its deposit transactions to avoid accumulation of noninterest-earning funds.