Gov. Bob McDonnell's new budget ends hundreds of millions of dollars in inflation allowances for health
care and non-classroom public school programs and dramatically scales back pre-kindergarten programs.
The two-year spending blueprint he's presenting Monday morning to the General Assembly reroutes the cash to priorities he's already set, particularly shoring up the severely underfunded public employee pension system.
McDonnell wants nearly $259 million in higher hospitalization costs and more than $65 million in nursing home inflation adjustments eliminated from Virginia's share of the federal-state Medicaid program.
He's targeting nearly $110 million in subsidies to retain non-classroom employees, chiefly in northern Virginia public school districts.
The retirement system would get a $2.2 billion boost and public school spending would get a net boost of $438 million tied mostly to instructional purposes.
City and county governments also face some hard choices.
The new $85 billion two-year spending blueprint for state government strives to shore up the underfunded pension fund with a $2.2 billion boost in employer contributions. But half of that comes from local governments.
The budget doesn't account for cost increases in hospital and nursing home rates for Medicaid recipients. It also reduces indigent care at state medical school teaching hospitals.
Overall, the new budget the governor presents Monday morning to the General Assembly's money committees trims $416 million from Virginia's Department of Medical Assistance Services.
Income limits for eligibility for optional long-term care are also being reduced, meaning fewer people will qualify.
But rising use of Medicaid forced McDonnell to boost state appropriations for the federal-state entitlement program for the aged, disabled, blind and needy by more than $600 million.
Medicaid's costs have grown by 80 percent over the past 10 years and now consume one-fifth of Virginia's general fund.
A full breakdown of all the Governor's budget actions can be found by clicking here.
You can read the complete budget document by clicking here.
Here's the news release from Governor McDonnell:
Governor Bob McDonnell unveiled his two-year budget for Fiscal Years 2013 and 2014, as well as his amendments to the concluding Fiscal Year 2012 budget, in a speech to the Joint Money Committees of the General Assembly this morning in Richmond. The Governor’s budget includes the greatest employer funding of the Virginia Retirement System in state history, provides significant new resources for higher education and K-12, prioritizes funds for transportation maintenance, and supplies more tools for job creation efforts in the state. The budget focuses state spending on the core functions of government, and on policies most directly tied to job creation and economic development, while not raising taxes. The full text of the Governor’s remarks to the Joint Money Committees can be found here: http://www.governor.virginia.gov/utility/docs/Address%20to%20the%20Joint%20Money%20Committees%20December%2019,%202011.pdf
Speaking about the first two-year budget of his administration, the Governor remarked, “In these difficult times for Virginia and our country, each state is responsible for how it chooses to navigate forward. In the Commonwealth, we have chosen a path of fiscal responsibility, accountability and restraint. Over the past two years we have eliminated $6 billion in budget shortfalls, and set spending back to nearly 2007 levels. We have not raised taxes. During that same period we have put historic new funding into transportation and job creation, and we have made the tough choices about where limited taxpayer dollars should be directed to best spur private sector job creation. We have seen the results. Virginia has the lowest unemployment rate in the Southeast, and the third-lowest rate east of the Mississippi River. Compared to the first month of our administration, 63,000 more Virginians are working today. Our commitment to responsible budgeting has led to two consecutive budget surpluses. Now, as state revenues begin to recover and our economy continues to turn around, we must diligently exercise the fiscal restraint and responsibility that has fueled this success.”
The Governor continued, “The budget bill that I am presenting today reflects the core priorities of government and our administration. It recognizes the realities of this economy. This is not a status quo period in Virginia history, thus, this is not a status quo budget. This budget prioritizes spending, ideas and policies that promote job creation, economic development and entrepreneurship. It reforms, restructures and reinvests in programs that work and make government more efficient and effective and accountable. It funds well key budget areas like education and transportation that lay the foundation for a prosperous future for our citizens. It helps solve specific big problems, like our near broken pension system, an underfunded transportation infrastructure system, and a higher education system in which tuitions have doubled in the last ten years. And it builds up cash reserves and liquidity as insurance to provide us flexibility in addressing the potential impacts of adverse future economic events and to ensure that we maintain Virginia’s critically important Aaa bond rating.”
He concluded, “This is a budget marked by tough decisions demanded by this difficult economy. Virginia citizens and businesses live on budgets and make tough decisions every day. Richmond must continue to do so as well. It is critically important that we do. When we live within our means and make government work better, we create the conditions in which private sector job creation can flourish and the citizens of Virginia can innovate, achieve and find the opportunities for success they need and deserve.”
General fund revenues are expected to grow 3.3 percent in fiscal year 2013 and 4.5 percent in fiscal year 2014.
Selected Highlights of the Governor’s Biennial Budget:
- Recommends $2.21 billion in total employer contributions to Virginia’s Retirement System.
- This is the largest state contribution and the largest total employer contribution to VRS in history.
- Provides $200 million in new funding for Virginia’s higher education system to make college more affordable and accessible for Virginia students.
- Directs an additional $438 million in total new state funding to public education for the next biennium.
- Requires reform initiatives for K-12 education that focus on performance by requiring the Department of Education to include in the annual School Performance Report Card for school divisions the percentage of each division’s annual operating budget allocated to instructional costs, with a goal of increasing classroom spending to 65% of the budget.
- Provides much needed liquidity in the state budget by leaving an unappropriated balance in the budget of $31.4 million, which is significantly greater than the $5 to $10 million that is normally left on the bottom line, reflecting the need for a greater cushion given economic uncertainty.
- Stabilizes Virginia’s finances by growing the Rainy Day Fund by $132 million in FY 2013 and $168 million in FY 2014.
- The Rainy Day Fund should double in size by end of FY 2014 with continued revenue growth, exceeding $600 million.
- Places $50 million into a new Federal Action Contingency Fund (FACT Fund), a cash reserve, that can be used to mitigate a variety of negative impacts on Virginia related to likely future adverse federal budget actions which cannot be addressed by the Rainy Day Fund.
- This Fund will be used to replace certain losses in direct federal grants; provide incentives to retain or consolidate federal facilities in Virginia, much like how the Commonwealth currently handles BRAC; address federal tax policy changes from conformity; and help businesses impacted by federal procurement or defense contracts as they change to other customers.
- Appropriates $40 million in new funding for continued aggressive economic development efforts to encourage and facilitate private sector job creation.
- Includes provision for up to a 3% bonus to full-time state employees on Dec. 1, 2012 if the state collectively saves at least twice the cost of the bonus $160 million. This one-time bonus, if achieved, would also save Virginia taxpayers at least $83 million.
- Increases the dedicated transportation allocation of the sales tax from .5% to .75% over the next 8 years.
- During the upcoming budget, the dedicated sales tax percentage will be increased to .55%, generating over $110 in critical new transportation funding for maintenance.
- Increases mental health funding by $30 million to continue transition to more community based care.
- In the FY 2012 budget amendments, $50 million is appropriated to eliminate the accelerated sales tax for 96% of all previously impacted retailers.