The Virginia House of Delegates on Thursday passed House Bill 5010, the bipartisan budget agreement that closes the remainder of Virginia’s $2.4 billion revenue shortfall for fiscal years 2015 and 2016. The legislation closes the shortfall by appropriating approximately $705 million of the rainy day fund, requiring nearly across-the-board spending cuts to state agencies totaling $342 million and capturing approximately $269 million in savings from unspent agency balances and other technical financing actions.
“The unexpected budget shortfall is the result of sequestration and increased federal taxes. These federal actions had a disproportionate impact on the Commonwealth, leaving the General Assembly with a number of tough decisions to make,” said Virginia House of Delegates Speaker William J. Howell (R-Stafford). “This bipartisan budget agreement tackles those tough decisions head on and positions the Commonwealth well moving forward. Acting sooner rather than later to address the budget shortfall creates certainty for our economy, gives state agencies flexibility to cut spending while protecting the core functions of government, and ensures that Virginia will maintain its Triple-A bond rating. This responsible action demonstrates clearly that while Richmond and Washington are separated by just 90 miles on a map, we are worlds apart when it comes to spending policy.”
The legislation was introduced by S. Chris Jones (R-Suffolk), Chairman of the House Committee on Appropriations. Under the direction of Chairman Jones, the House Appropriations Committee began working on a plan this summer to close the budget shortfall. Chairman Jones and House Leadership then reached out to the Senate of Virginia and Governor Terry McAuliffe in order to bring the legislation to the floor during the special session.
“Acting on a budget prior to the regular session of the General Assembly is unprecedented, but it was very much necessary and the right thing to do,” said Chairman Jones. “The budget shortfall was caused by actions outside of our control, but we have an obligation to Virginia taxpayers to responsibly spend their money and to balance the state budget. Doing so sooner rather than later is prudent and responsible. It sends a clear signal to the bond rating agencies that Virginia is willing to make tough decisions in order to ensure that state government lives within its means.”
Under this legislation, which Governor Terry McAuliffe has committed to signing without amendments, state agencies will have to cut spending across-the-board by approximately three percent. K-12 education is exempted from this requirement and the three percent reduction is approximately half of what Governor McAuliffe originally requested from Virginia’s institutions of higher education.
“Virginia families and businesses are faced with tough financial decisions each and every day, especially during tough economic times,” said House Majority Leader Kirk Cox (R-Colonial Heights). “They have to set priorities and make those decisions in order to live within their means. The House of Delegates strongly believes that government can and must do the same. The General Assembly is no exception, which is why we are returning $4.9 million, or approximately six percent of our two year budget, in unspent balances to the General Fund in order to close the budget shortfall. We are making these necessary and responsible spending cuts, but we are also protecting the core functions of government. Teachers and students in Virginia’s public education system are protected from these cuts, and the House of Delegates has reduced by nearly half the reductions that Governor McAuliffe requested for higher education. This should protect our Virginia students and families from increasing tuition costs.”
House Bill 5010, which was passed by the House Appropriations Committee on Tuesday, appropriates approximately $705 million of Virginia’s Revenue Stabilization Fund, often called the rainy day fund.
“Thanks to cautious and conservative budgeting over the last decade, Virginia has built a significant balance in its rainy day fund,” said House Appropriations Committee Vice-Chairman Steve Landes (R-Augusta). “We are reluctant to use these one-time resources, but considering the severity and hopefully singular nature of the current shortfall, we feel that doing so is responsible and prudent. Utilizing the rainy day fund will prevent deep cuts to K-12 education, harmful reductions to local governments, sheriffs, police, and fire departments, and hopefully mitigate layoffs for our hard-working state employees. It is a tough decision to make, but that is exactly why each member of the General Assembly was elected. This bipartisan budget action is the right thing to do for the Commonwealth.
By passing this bill now, the General Assembly and Governor McAuliffe will have completed most of next session’s work on the state budget. Governor McAuliffe is required to submit in December a plan to address approximately $270 million in final reductions.