New Gov. Courts Business

Virginia’s new governor, Robert F. McDonnell, told lawmakers on Monday the state must retain its business-friendly environment, in part by barring tax hikes in the fiscal 2011 and 2012 budget. The state faces a $4 billion budget shortfall.

“We have fallen behind many neighboring states in the tax and regulatory incentives we offer, which cannot last,” McDonnell said in an address to the General Assembly outlining his budget plans. “Investment in job creation and economic development today creates new tax revenue tomorrow.”

He proposed increasing funding incentives for biotech businesses, rural development, and movie production. McDonnell reaffirmed a campaign commitment to veto tax increases in the budget.

Former Gov. Timothy Kaine submitted a budget last month that included a 1% state income tax increase, which ­McDonnell has said he opposes. He will be submitting amendments to Kaine’s budget.

But to balance the budget, McDonnell acknowledged that “more spending cuts must be made.”

The Virginia Department of Transportation could be targeted for cuts. McDonnell said of VDOT: “It is time to conduct performance audits to determine what works, what doesn’t, and what can be done better for less.”

Revenue at VDOT is estimated to be 2.6% below what was expected when the budget was approved in June, according to revised figures released in December.

Overall, the state’s fiscal 2010 general fund is expected to decline 3.8% from the fiscal 2009 total, according budget estimates released by Kaine in December. The general fund is forecast to increase 2.7% in fiscal 2011.

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