WASHINGTON — Virginia posted a preliminary fiscal 2010 surplus of at least $220 million as income and corporate taxes rebounded, reversing a $1.8 billion budget shortfall the state faced six months ago.
The final figure for the budget surplus won’t be made official until August. Gov. Robert F. McDonnell last month hinted at a possible surplus for fiscal 2010, which ended June 31, when May revenues came in stronger than expected. Part of the surplus proceeds may be diverted to a fund that supports outstanding clean water revenue bonds.
The state is rated triple-A by Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings.
McDonnell said in a statement he hopes to use the surplus to give state employees a one-time non-recurring 3% bonus in December, their first pay increase since 2007. The state laid off almost 600 workers in fiscal 2010 through May, according to Moody’s. Additionally, McDonnell hopes to spend $18 million on schools from sales tax collections.
McDonnell also wants to put 10% of the surplus in the state’s water quality fund, which supports bonds that are issued for Chesapeake Bay clean-up efforts.
The state’s clean water revolving loan fund allows local governments to borrow at below-market rates for water quality improvement projects.
The Virginia Resources Authority in April sold $98.8 million of clean water state revolving fund revenue bonds to Bank of America Merrill Lynch. The bonds are rated triple-A by Moody’s, Standard & Poor’s, and Fitch.
Throughout the recession, Virginia’s economy has been brighter than most states, with support from government employment and a large military presence. In May, the state’s unemployment rate declined to 7.1%, while the national unemployment rate was 9.7% for the month. In February, the state’s mid-session re-forecast revised higher by $103.5 million revenues for the second half of the fiscal year. Still, the state slashed about $2.2 billion of spending. The state’s fiscal 2009 general fund collections fell by 9.2%.
States’ tax revenues may slowly be turning positive, according to a report issued Tuesday by the Nelson A. Rockefeller Institute of Government. The report found states’ tax revenues increased 2.5% year-over-year for the first quarter ended March 31. Virginia’s tax collections for the period fell 1.0%, but its personal income tax collections were up 4.2%, according to the report.