Mount Vernon — This week, I wanted to give an economic report card highlighting the progress we’ve made in the Commonwealth of Virginia for 2017.
Last year, 2016 general fund revenue collections were $268.9 million below our official forecast, which required that we reforecast general fund revenues for the 2016-18 biennium. The revised forecast lowered our anticipated collections for the biennium by $1.2 billion from what was originally estimated in the enacted budget.
This situation posed a major challenge to our fiscal well-being. The General Assembly passed this balanced budget in the face of a significant revenue shortfall.
The General Assembly and the Governor were able to refocus and tighten up our economic development efforts and incentives so that they will be more effective and accountable, while increasing funding and improving programs that address mental health.
Gov. McAuliffe also restored pay increases for our hard-working state employees, law enforcement personnel at the state and local level, constitutional officers, higher education faculty, and public school teachers.
This year, we had a surplus in our general fund revenue collections and the Virginia economy continues to expand, with some of our higher-paying job sectors showing solid growth.
For fiscal year 2017, total general fund collections, excluding transfers, exceeded the official forecast by $134.1 million. After we factor in end-of-the-year transfers to the general fund from other sources, we ended fiscal year 2017 with an additional $2.5 million, bringing the total to $136.6 million above our budget assumptions for general fund resources. Strong growth in payroll withholding and corporate income tax collections drove the surplus.
Most of the surplus revenue will go to expand Virginia’s cash reserves in the event of a future economic downturn. Given where we are at, further actions to build up cash reserves and protect our AAA bond rating are paramount among the budget issues we will face going forward.
Given the level of federal and economic uncertainty, any effort to build up liquidity and cash reserves is a wise course of action as there is no clear idea of what will govern national fiscal policy after Oct. 1, 2017.
The Governor has stated he will pursue Standards of Quality in education spending and Medicaid Expansion for inclusion in his outgoing (his final) budget. We’ve kept our eye on our goal of building a new Virginia economy every day.
That means creating a business climate that attracts good-paying jobs in 21st century industries, and strengthening our state revenues so we can reinvest in programs that prepare our workers for these high-level jobs. Focusing on that mission is key to lowering our economic dependence on the federal government and will provide stability as we face the highs and lows of future economic cycles.