The Northern Virginia Daily's Political Depot

A service for our readers outside the Northern Shenandoah Valley... a sampling of The Daily's political coverage, plus unofficial, 'reporter's notebook' stuff. And occasional dry humor...

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Location: Strasburg, Virginia

Sunday, November 20, 2005

Surplus doesn’t mean big spending; A1

Competition fierce for state funds

By Garren Shipley
(Daily Staff Writer)

Virginia’s financial health continues to be solid, but legislators shouldn’t think they’ve got a bottomless wallet when they reconvene in January, according to a senior state delegate.

The state’s general fund is likely to end the 2004-06 budget with a $1.6 billion surplus, but both senators and delegates were told at a retreat in Loudoun County this week that there are several priorities and “unmet needs” competing for those funds.

And Virginia isn’t in charge of its own economic fortunes — Washington, D.C., is, said Del. Vince Callahan, R-McLean, chairman of the House Appropriations Committee.

Until fiscal 2004, the state was still in a slump brought on by the combination of spending increases during the late 1990s and 2000 and the implosion of the “dot com” bubble.

Revenues actually dropped from 2000 levels until 2004, which forced legislators to deal with a collective $6 billion budget shortfall.

“So what caused this remarkable turnaround? Simply put, the federal government,” Callahan said Tuesday at the committee’s retreat at the National Conference Center in Lansdowne.

Federal spending makes up about a third of the economy in the greater Washington area, and has been growing at a record clip since Sept. 11, 2001, due to homeland defense spending.

“To put this expansion into perspective, Northern Virginia has accounted for approximately 60 percent of the state’s overall job gains,” Callahan said.

Much like the defense spending boom of the 1980s, Virginia’s economy is “inextricably linked” to how Congress wields the public checkbook.

“Should growth in federal spending be reduced, the fortunes of Virginia may change,” he told fellow delegates.

For now, the state’s finances look to be in very good shape.

A new report from Secretary of Finance John Bennett released Monday found that October general fund revenue was running 12.8 percent above October 2004 levels.

That’s an increase of about $500 million. General fund revenue could have declined by about 3 percent and still have met revenue targets.

When the books are closed on the 2004-06 budget, the state will likely have $1.6 billion over and above budgeted expenditures on hand. It ended the previous fiscal year with a $323 million surplus.

Lawmakers raised taxes by some $1.5 billion after a contentious session in 2004, shortly before the surplus was announced.

A number of obligations are already in line for any surplus funds, including the state’s “rainy day” fund, the water quality improvement fund and new prisons now under construction.

One of the largest financial commitments coming in 2006 is the “re-benchmarking” Virginia’s Standards of Quality.

The Virginia Board of Education sets the standards, subject to revision by the General Assembly. They are one way the state parcels out tax revenue to local school districts.

The standards, better known as the SOQs, set out the minimum requirements for school systems in the state. Bi-annual adjustments to the standards will require the state to add more than $1.18 billion to the 2006-08 budget over the 2004-06 budget.

Gov. Mark R. Warner is slated to present his final budget to the General Assembly next month, shortly before Gov.-elect Tim Kaine takes office.