On July 19, Governor Bob McDonnell announced that the state concluded Fiscal Year (FY) 2011 with an approximately $311 million surplus from general fund revenue collections and transfers. Total revenue collections rose by 5.8% in FY 2011, well ahead of the revised revenue forecast 3.5% growth. The main drivers of the revenue increase were growth in individual income tax receipts from both payroll withholding and non-withholding, key economic indicators.
The final FY 2011 surplus number will be adjusted upward in the month ahead after the addition of final tabulations of savings recognized through greater operational efficiencies and incentives to control spending throughout state government. In FY 2010 the revenue surplus for the year was $228 million. The final FY 2010 surplus, including savings, was $403 million. The final surplus figure for FY 2011 will be released in August. It's the second fiscal year in a row that Virginia has concluded the fiscal year with a revenue surplus. This is also the first year since 2008 that there has been actual revenue growth over the previous year.
"Many factors have led to this surplus,” Governor McDonnell said. “We have budgeted conservatively and we have kept taxes low. Additionally, our targeted investments in job-creating programs in the areas of economic development, transportation and higher education, along with our strong Right to Work law, pro-business environment, and commitment to keeping litigation and regulation to a minimum, have continued to make Virginia more and more attractive to job-creating businesses. Our unemployment rate has now fallen to 6 percent, the third-lowest rate east of the Mississippi, and more Virginians are working again. As Virginians work and spend, it translates into increases in incoming revenues to the Commonwealth. State government must continue to do its part to control spending and look for new opportunities to innovate, restructure and save taxpayer dollars. We still have much work to do before we are completely out of this tough economic period, and unfortunately federal issues continue to threaten the positive advances we are making in the states.”
At Tuesday’s press conference, Secretary of Finance Ric Brown detailed the sources of the surplus funds and where they will be directed. The overwhelming majority of the revenue is obligated to predetermined areas of the state budget due to the Virginia Constitution and state law which governs revenue allocation in the event of a surplus. Governor McDonnell will also direct funds to shoring up the Virginia Retirement System as part of his ongoing effort to reform and improve Virginia's pension system to ensure its long-term viability.
Disbursement of FY 2011 Revenue Surplus (All numbers are approximate and subject to revisions):
$146.6 million: Revenue Stabilization Fund Deposit from FY2011 Surplus (Subject to Final Audit)
$32.2 million: Water Quality Fund
$23.0 million: Pay Transportation for its Share of the Accelerated Sales Tax
$8.9 million: Interest on Unemployment Compensation Trust Fund Due to Federal Government
$4.3 million: Tornado Relief
$7.5 million: For Base Realignment and Closure (BRAC) Obligations
$7.4 million: Supplemental Public Safety Funding for Sheriff's Offices
From Remaining Funds: Additional Contributions to the Virginia Retirement System to Help Ensure Long-Term Viability and Stability of the System and to Transportation Infrastructure