Virginia Governor Offers $85 Billion Biennial Budget

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Virginia Governor Bob McDonnell speaks at the Conservative Political Action Conference (CPAC) during their annual meeting in Washington, February 19, 2010. REUTERS/Joshua Roberts (UNITED STATES - Tags: POLITICS)

BRADENTON, Fla. — Virginia Gov. Robert McDonnell Monday outlined his biennial budget for fiscal 2013-14, which includes enhancing reserves to protect the state's gilt-edge ratings and additional funds to help insulate the state against cuts in federal revenue.

McDonnell's two-year budget totals $85 billion, an increase of $5 billion over the current budget, and includes more than $323 million of bonds for college and university capital projects.

To reassure rating agencies that Virginia will be proactive, innovative and responsible with its finances, the governor suggested that the state's rainy-day fund total $440 million in 2013 and $600 million in 2014.

McDonnell also wants to set aside an additional $20 million in 2014 to bulk up the existing $30 million in the Federal Action Contingency Trust, or FACT reserve fund, "that can be used to mitigate a variety of negative impacts on Virginia related to likely future federal actions, which cannot be addressed by the rainy-day fund," he said.

Virginia's credit rating, like a number of states, has a negative outlook by some agencies because of its dependence on federal funding.

"This FACT fund will play an important role in positioning Virginia for the long term changes ahead, as will our efforts to diversify the state's economy," McDonnell said, noting that he plans to join legislative leaders for rating agency presentations in the weeks ahead.

Virginia was among the states that saw general revenue growth in fiscal 2011. Those funds grew 5.8% to $15.04 billion, and exceeded the official forecast of 3.5% growth by $321.7 million. General fund revenues are projected to grow by 3.3% in fiscal 2013 and 4.5% in 2014.

"We finished fiscal 2011 pretty much on target, with a surplus of $545 million, despite uncertain economic conditions," McDonnell said in a report to lawmakers. His recommendations included an unencumbered balance forward of $31.4 million.

The Republican governor said his budget bill for 2013-14 reflects "core priorities" of government and prioritizes spending to promote job creation and economic development. His budget does not raise taxes, but includes some fee increases, and provides merit raises if budget goals are met. It recommends $2.21 billion in local and state contributions to the Virginia Retirement System, the largest contribution ever to tackle mounting liabilities.

The budget "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 10 years," McDonnell said. "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 triple-A bond rating."

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