association of government accountants highlights of the budget richard d. brown director department...

Association of Government Accountants

Highlights Highlights of the Budgetof the Budget

Richard D. BrownDirector

Department of Planning and Budget

March 19, 2008

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• The Code of Virginia calls for the development of two budget documents:– Executive Budget Document– Budget Bill

• Current provisions require submission by December 20

• Both documents have operating and capital sections

• The Budget Bill also specifically covers:– Transfers– General Provisions – These are conditions

and stipulations governing appropriations

Legal requirements for the executive budget

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• Each agency must have an appropriation from the General Assembly to spend money from the state treasury (State Constitution)

– The Department of Planning and Budget provides access to a legislatively approved appropriation through the allotment process

– The Department of Accounts (State Comptroller) monitors spending against appropriation allotments

• Individual agency heads may be held personally liable for (deficit) spending in excess of their appropriation (Appropriation Act)

• The Governor must take all steps to see that spending is within revenue collections during the course of the biennium (two-year) budgetary period (State Constitution and Appropriation Act)

Authority to control spending

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2006-2008 Budget:General Fund vs. Nongeneral Fund

Data from 2007 Appropriation Act (Chapter 847 )

Nongeneral Fund

51.6%

General Fund

48.4%

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General Fund Revenues for 2006-2008

Economic trends are important because employment, wage gains, and consumer spending account for about 89

percent of all general fund revenues.

2006-2008 general fund revenues = $32.2 billion

Data does not include transfers or balances. Data from 2007 Appropriation Act (Chapter 847)

Sales & use taxes19.7%

Corporate income tax5.3%

Other taxes & revenue11.5%

Individual income tax63.6%

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Nongeneral Fund Revenues for 2006-2008

Federal grants account for 40 percent of all nongeneral funds revenue

“Transportation” includes fuel tax, sales tax, motor vehicle sales tax, and motor vehicle licenses.Data does not include balances or bond proceeds. Data from Chapter 847, 2007 Appropriation Act.

2006-2008 nongeneral fund revenues = $36.9 billion

Transportation 14.9%

Institutional revenue from

higher education tuition & fees and hospitals

23.3% Other revenue 21.4%

Federal grants & contracts

40.3%

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Where the Money Goes 2006-2008 (All Funds) = $71.1 Billion

Commerce and Trade2.4%

General Government

8.5%

Health and Human

Resources26.2%

Public Safety7.0%

Transporation13.0%

Other3.7%

Education39.3%

78.5% of the budget (all funds) goes to education, health and human resources, and transportation

“Other” includes legislative and judicial branches, technology, natural resources, independent agencies, and non-state agencies.

Source: Department of Planning and Budget March 2008. Data from 2007 Appropriation Act (Chapter 847)

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Where the Money Goes 2006-2008 (General Fund) = $34.4

Billion

Education45%

Other4.0%

Transporation2.3%

Public Safety9.9%

Health and Human Resources

22.2%

General Government

15.5%

Commerce and Trade0.7%

77.5% of the general fund budget goes to education, health and human resources, and public safety

“Other” includes legislative and judicial branches, technology, agriculture and forestry, natural resources, independent agencies, and non-state agencies.

“General Government” category includes administration, finance, executive offices, and central appropriations.

Source: Data from 2007 Appropriation Act (Chapter 847).

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Almost One-Half of the General Fund Goes to Localities

*General administration includes personnel, accounting, budget, information services, internal audit and general services (such as purchasing, building security, and record keeping) throughout state government. (Chapter 847, 2007 Session)

Car Tax Relief5.5%

Individuals19.2%

General administration

12.6%

General citizenry21.1%

Locally run programs

41.5%

General Fund Appropriations

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Major Budget Drivers: 1990-1995

-2.1%

23.1%17.7%

38.4%

107.5%

-20%

0%

20%

40%

60%

80%

100%

120%

HigherEducation

K-12 MentalDisabilities

Corrections Medicaid

All programs

22.8%

Percent increase in general fund budget

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54.9%

45.3% 40.1% 40.2%

28.5%

0%

10%

20%

30%

40%

50%

60%

HigherEducation


Corrections Medicaid

All programs

50.8%


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-1.9%

28.2% 28.3% 20.1%36.6%

123.6%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

HigherEducation


Corrections Medicaid Car Tax

All programs

20.6%


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35.7%28.8%

17.6%

27.7%

51.7%

0.2%

0%

10%

20%

30%

40%

50%

60%

HigherEducation


Corrections Medicaid Car Tax


(Based on Introduced Budget for 2008-2010)

All programs

34.1%

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What Can We Use the Revenue Stabilization Fund For?

1. A shortfall in current enacted budget

2. A projected severe downturn in economy in next biennium

3. An emergency spending event (i.e. natural disaster or terrorist attack)

YES

NO

NO

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General FundRevenue Shortfall

FY 2007$ in Millions

Item AmountRevenue (234.4)$ Transfers 25.9 Total General Fund (208.5)$

Revenue ShortfallFY 2008

$ in Millions

Item Oct 2007 Dec 2007 Feb 2008 Total

Revenue (406.7)$ 61.6$ (339.0)$ (684.1)$ Transfers 2.3 (84.6) (2.9) (85.2)

Total (404.4)$ (23.0)$ (341.9)$ (769.3)$

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How Much Can Be Withdrawn from the Revenue Stabilization Fund?

Rule #1 – The General Assembly may appropriate a withdrawal from the Revenue Stabilization Fund if there is a revenue shortfall of 2 percent or greater in certified tax revenue for ($278.8 million for FY2007).

FY2008 calculation – uses data from FY2007

Individual Income + Corporate Income + Sales Tax = Total x 2% Shortfall $9,787.8 $879.6 $3,274.3 $13,941.6 $278.8

Rule #2 – The withdrawal cannot exceed ½ of the revenue shortfall ($846.7 million).

Assumed Shortfall Potential Withdrawal $846.7* 2 = $423.4

A withdrawal from the Revenue Stabilization Fund may be possible in the event of a revenue shortfall.

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Revenue Stabilization FundFY2008

Chapter 847 Appropriated General Fund Revenue 17,641,285,296$

HB/SB 29 Revised General Fund Revenue 17,118,999,140

Difference (Shortfall) (522,286,156)

February Revenue Shortfall (339,300,000)

February Budget Balancing Plan

Balance items (Capital Reversions) 4,448,219

Revenue Items (Interest and Corrections) 5,633,233

Transfer items (DMV and Drug Assessments) 4,500,000

Total 14,581,452

Total Difference (Shortfall) (846,704,704)

1/2 of Shortfall Withdrawal 423,352,352

Original Withdrawal HB/SB29 Introduced 261,143,078

Additional Withdrawal 162,209,274

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The General Assembly is Including a $351.5 Million Withdrawal from the

Revenue Stabilization Fund in FY 2008

80 85

157

224

361

575

472

247

340

482

1,065

1,190

1,098

1,1651,215

716

0

200

400

600

800

1,000

1,200

1,400

FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Revenue Stabilization Fund -- June 30 BalanceFY 1995-2007 Actual and FY 2008-2010 Forecast

(millions of dollars)

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Revenue Stabilization Fund Calculation for FY 2007

Tax (in millions) Percent Growth

Fiscal Year Individual Corporate Sales TotalFrom Last

YearPrior 6-yr Average

2007 $9,787.8 $879.6 $3,274.3 $13,941.6 5.92307 5.61722

Step 1 – Calculate difference between current growth and average growth for the prior six years

Current growth = 5.92307%Prior 6-yr avg. = 5.61722%Difference 0.30585%

Step 2–Take one-half the difference0.5 x 0.30585% = 0.15292%

Step 3–Multiply total individual, corporate, and sales taxes by the result of Step 2

$13,941.6 x .00153 = $21.3

Minimum Appropriation = $21.3 million (FY 2009)

Step 4–Calculate average total collections for individual, corporate, and sales taxes for the last three years (FY 2005, FY 2006, and FY 2007)

($12,036.7 + $13,162.0 + $13,941.6)/3 = $13,046.8

Step 5–Take 10 percent of the result of Step 4

$13,046.8 x 0.10 = $1,304.7

Maximum Fund Size = $1.3047 billion (FY 2008)

Note: The calculations of the minimum appropriation and the maximum fund size include tax reform impacts.

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Major Components of Plan to Deal With Revenue Shortfall

$ in Millions

Governor House Senate

Budget

Conferees

Use of FY2007 Balances 96.0$ 148.3$ 98.1$ 120.4$

Use Revenue Stabilization Fund 422.9 280.0 422.9 351.5

Bond Existing Capital Outlay 300.0 225.0 300.0 300.0

State Agency Cuts FY2008 5.50% 5.00% 5.00% 5.00%

FY2009 8.00% 5.00% 5.00% 5.75%

FY2010 8.00% 5.00% 5.00% 5.75%

Aid to Locality Reductions FY2008 0.20% 0.20% 0.20% 0.20%

FY2009 5.60% 0.20% 0.20% 4.40%

FY2010 5.60% 0.20% 0.20% 4.40%

Cash Flow Capital Projects -$ 177.9$ -$ 100.0$

Freeze Capital Projects - 141.2 - -

State Employee Health Insurance 33.9 62.9 82.7 77.7 Use Transportation Funds FY2009 180.0 180.0 180.0 180.0

Repay FY2010

Bond FY2010

Gas Tax+ FY2009

Bond FY2010

Maintenance Reserve 80.0 150.0 72.0 100.0 Bond Bond

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Other Budget Highlights

• Employee Compensation– A 2.0 percent salary increase on November 25 of both

years for state employees and faculty, and December 1 of both years for state-supported local employees.

– A 2.0 percent salary increase for teachers and other SOQ-funded positions on July 1, 2009.

• Public Education– Full funding of Standards of Quality Program (+$1.1

billion).

• Preschool Initiative for Disadvantaged Four-Year Olds

– $22 million to increase the per pupil amount to the state’s share of $6,000 in FY 2009 to benefit all participating school divisions and to add a capped composite index of 0.5000 in FY 2010 to encourage affected localities to use more of their unfilled slots. (Caboose bill retains $1.3 million for start-up/expansion grants to add 575 students next school year.)

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Other Budget Highlights (continued)

• Higher Education– Tuition Moderation Incentive Fund: $35.0 million for

the biennium ($17.5 million per year) for schools that hold tuition at 3 percent or lower in FY 2009 (plus up to an additional 1 percent for in-state undergraduate student financial aid), with the same stipulations for FY 2010. (An additional stipulation limits the increase in FY 2009 to 12 percent to receive an allocation in FY 2010.)

– Higher Education Research: Over $32.9 million over the biennium for a variety of research initiatives.

• Health and Human Resources– MR Waivers: Includes $41.6 million for 600 new MR

waivers in FY 2009, a 3.6 percent rate increase for providers, and funding for MR waiver start-up costs.

– Mental Health Initiative: Retains $41.6 million to fund emergency mental health services and implement legislation passed by the General Assembly as well as jail diversion and children’s mental health services.

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• Health and Human Resources (continued)

– Foster Care and Adoption Services: Provides $13.4 million to strengthen community-based foster care and adoption services including a 23 percent rate increase, recruitment and retention initiatives and social worker training.

– Health and Health Care: Adds $8.2 million to increase the “safety net” including funding for community health centers and free clinics ($4.3 million), prenatal care for low-income pregnant women ($1.6 million), and funding for the Uninsured Medical Catastrophe Fund ($450,000).

• Economic Development– Governor’s Opportunity Fund: Retains $15.1 million

that was in introduced budget.

– Mortgage Counselling Assistance: Retained $250,000 in the current year for mortgage counselling assistance program administered by the Department of Housing and Community Development.

– Tourism Promotion: Retained $400,000 in each year for Motion Picture incentive grants and provided $325,000 for cooperative advertising programs in Virginia.

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• Economic Development (continued)

– BRAC: Retained full funding for DARPA and NAS Oceana and provided $2.0 million in new funding for Fort Lee.

• Natural Resources– Land Conservation: Provides $30.0 million the first

year in bond funding to be used for acquisition of open space lands and historic sites, including $5.0 million for civil war battlefield preservation. In addition, $1.5 million for purchase of development rights is included in the Department of Agriculture and Consumer Services.

– Agricultural Best Management Practices: Provides $20.0 million for non-point source pollution control through the Water Quality Improvement Fund.

– Dam Safety: Provides a total of $30.0 million in bond funding for repairs of dams owned by State Parks, Soil and Water Conservation Districts and local governments to bring dams up to current dam safety standards.

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• Natural Resources (continued)

– Combined Sewer Overflow Projects: Retains $3.0 million in the first year to be split between the Richmond and Lynchburg CSO projects.

• Public Safety– Victims of Crime: Provides $1.5 million over two

years for SAVIN Victim Notification and $1.5 million the first year only to fund “Alicia’s Law” (Internet Crimes Against Children Task Forces in Northern and Southern Virginia).

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For more information

on Virginia’s budget,

visit our website at:

www.DPB.Virginia.

gov

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