Gov. Terry McAuliffe said today he will not change his estimate of revenues available for the two-year, state budget he proposed in December.
McAuliffe ruled against revising revenues either up or down, as the governor often does in the middle of the General Assembly session to allow legislators to adjust their proposed budgets, which the money committees will release on Sunday.
“While we believe lowering the estimate is an unnecessary step that will impair investments in core programs, we also recommend against spending more than the current budget and raising the possibility of a revenue shortfall down the road,” the governor said in a statement.
Secretary of Finance Richard D. “Ric” Brown told the House Appropriations and Senate Finance committees Tuesday that the governor would not change the total amount of revenues available for the state’s general fund budget, which accounts for more than $40 billion of the $109 billion budget.
The governor noted that his proposed budget lowered its assumptions for collection of estimated income tax payments — those not paid through payroll withholding — by more than $750 million in this fiscal year and the 2016-2018 budget.
However, the governor’s office said McAuliffe is proposing adjustments to individual sources of revenue to “better align the forecast with actual revenue collection trends on a source-by-source basis.”
“These adjustments offset one another, creating no net change in total revenue,” the governor’s office said.
House Appropriations Chairman S. Chris Jones, R-Suffolk, said the adjustments lower the forecast for sales and corporate tax revenues by about $60 million, which would be offset by reduced income tax refunds paid by the state, and increases in revenues from taxes on deeds and other court records, and insurance premiums.
“Taking down corporate and sales is a prudent approach,” Jones said.
Jones also agreed with the governor’s decision not to change the total state revenue estimate.
However, he cautioned, “I still have concerns about income tax withholding (collections) at the end of the day.”
McAuliffe based his decision on last week’s update of state revenues through January that showed income tax collections tracking the annual forecast, but a decline in sales tax collections that has raised concern among administration and assembly budget officials.
General fund revenues — primarily income and sales taxes — grew 6.8 percent in January compared with the previous year, but sales tax collections fell by almost 1 percent for a period that included the Christmas holiday.
Total general fund revenues grew 2.4 percent from July 1 through January, lagging the forecast of 3.2 percent for the fiscal year that ends June 30.
The governor’s decision represents a departure from the first two years of his term. He reduced the revenue forecast in the middle of the 2014 legislative session and increased the forecast a year ago after revenues rebounded, reducing the effect of an expected $2.4 billion shortfall.
“As Virginia continues to grow past the damage of the recession and federal sequestration cuts, we have a responsibility to strike a balance between fiscal prudence and smart investments in a new Virginia economy,” McAuliffe said.
“After an extensive review of our current economic conditions, we believe the current budget does just that and recommend against any significant adjustments to the revenue forecast.”