Virginia's McDonnell Tries to Prepare for Fiscal Cliff, Bolster Transportation Funding

WASHINGTON — Virginia Gov. Bob McDonnell unveiled his 2012-2014 budget proposal, an $86 billion plan he said prepares the Commonwealth for the fiscal cliff by increasing both cash reserves and flexibility and puts transportation revenue on a firmer footing.

Speaking to a joint session of the Virginia Senate Finance, House Appropriations, and House Finance Committees in Richmond on Monday, McDonnell emphasized the need to invest in infrastructure while maintaining a conservative spending approach in the face of the impending fiscal cliff.

“Looking ahead, the consensus opinion heard from the Joint Advisory Board of Economists and the Governor’s Advisory Council on Revenue Estimates was one of caution as the economy continues to slowly recover, and because the ‘fiscal cliff’ looms large,” McDonnell said. “Current national indicators suggest that we will continue to see slow economic growth until the unprecedented uncertainty surrounding the fiscal cliff is resolved. We cannot predict what new tax policies or spending cuts a federal plan will contain, and if it will even be agreed upon before our nation goes over the cliff in 14 days.”

McDonnell’s proposals, which are amendments to two-year budget legislation drafted by lawmakers, would double the size of the commonwealth’s triple-A rated rainy day fund to nearly $700 million by the end of June 2014 and set aside an additional $50 million for fiscal cliff fallout. To stabilize Virginia’s unsteady state employee health insurance fund, McDonnell proposed a transfer of $64 million of general funds.

“The unprecedented uncertainty that we face on the fiscal front from Washington requires that Virginia maximize both liquidity and budgetary flexibility,” he said.

Despite the anxiety of the uncertain national economic situation, McDonnell’s amendments continue to highlight his signature interest in transportation spending. Though the governor said he plans to submit a full transportation spending plan soon, he had to disclose any plans relating to the general fund with his budget proposals.

His plan calls for a shift of 0.05% of the commonwealth’s 5 cent sales tax to transportation, beginning July 1 of next year. The governor said this would amount to $48.1 million in fiscal 2014.

“A comprehensive solution to our transportation needs has been elusive for years,” McDonnell told the legislators. “To successfully address transportation, we must be able to come together across regional boundaries to implement a workable solution. While we will certainly require additional resources dedicated to transportation, prioritization of some existing revenue for transportation is both a practical and necessary component of a comprehensive solution.”

McDonnell announced capital outlays of about $345 million of tax-supported debt, which he said would be used to “fix things that are broken,” and complete projects that have already begun, rather than begin new projects.

The Virginia General Assembly would have to approve McDonnell’s amendments in order for them to take effect. This represents McDonnell’s final biannual budget request, as he will be ineligible to seek another term in 2014 due to the commonwealth’s constitutional term limits.

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