Association of Government Accountants
Highlights of the Budget
Richard D. Brown Director Department of Planning and Budget
March 19, 2008
Association of Government Accountants
Legal requirements for the executive budget
• 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
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Association of Government Accountants
Authority to control spending
• 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)
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Association of Government Accountants
2006-2008 Budget: General Fund vs. Nongeneral Fund
Nongeneral Fund 51.6%
General Fund 48.4%
Data from 2007 Appropriation Act (Chapter 847 )
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Association of Government Accountants
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
Individual income tax 63.6% Sales & use taxes 19.7%
Corporate income tax 5.3%
Other taxes & revenue 11.5%
Data does not include transfers or balances. Data from 2007 Appropriation Act (Chapter 847)
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Association of Government Accountants
Nongeneral Fund Revenues for 2006-2008
Federal grants account for 40 percent of all nongeneral funds revenue
Institutional revenue from higher education tuition & fees and hospitals 23.3% Transportation 14.9%
Other revenue 21.4%
Federal grants & contracts 40.3%
2006-2008 nongeneral fund revenues = $36.9 billion
“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.
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Association of Government Accountants
Where the Money Goes 2006-2008 (All Funds) = $71.1 Billion
78.5% of the budget (all funds) goes to education, health and human resources, and transportation
Other 3.7% Transporation 13.0% General Government 8.5% Commerce and Trade 2.4%
Public Safety 7.0%
Health and Human Resources 26.2%
Education 39.3%
“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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Association of Government Accountants
Where the Money Goes 2006-2008 (General Fund) = $34.4 Billion
77.5% of the general fund budget goes to education, health and human resources, and public safety
Transporation 2.3% Other 4.0% General Government 15.5%
Public Safety 9.9% Commerce and Trade 0.7% Health and Human Resources 22.2% Education 45%
“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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Association of Government Accountants
Almost One-Half of the General Fund Goes to Localities
General Fund Appropriations
Individuals 19.2% Car Tax Relief 5.5%
General administration 12.6%
General citizenry 21.1%
Locally run programs 41.5%
*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)
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Association of Government Accountants
Major Budget Drivers: 1990-1995
Percent increase in general fund budget
120% 100% 80% 60% 40% 20% 0% -20%
Higher Education K-12 Mental Corrections Disabilities Medicaid
107.5%
23.1% -2.1%
38.4% 17.7%
All programs 22.8%
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Association of Government Accountants
Major Budget Drivers: 1995-2000
Percent increase in general fund budget
54.9% 45.3% 40.1%
60% 50% 40%
40.2% 28.5%
All programs 50.8%
30% 20% 10% 0%
Higher Education K-12 Mental Corrections Disabilities Medicaid
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Association of Government Accountants
Major Budget Drivers: 2000-2005
Percent increase in general fund budget
140% 120% 100% 80% 60% 40% 20% 0% -20%
Higher Education K-12 Mental Disabilities Corrections Medicaid Car Tax
123.6%
All programs 20.6%
28.2% 28.3% 20.1% 36.6%
-1.9%
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Association of Government Accountants
Major Budget Drivers: 2005-2010
Percent increase in general fund budget
(Based on Introduced Budget for 2008-2010)
60% 50% 40% 30%
51.7%
All programs 34.1%
35.7%
28.8%
27.7%
17.6%
20% 10%
0.2%
0%
Higher Education K-12 Mental Corrections Medicaid Disabilities Car Tax
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Association of Government Accountants
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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Association of Government Accountants
General Fund Revenue Shortfall
FY 2007
$ in Millions
Item
Revenue Transfers Total General Fund
Amount
$ $ (234.4) 25.9 (208.5)
Revenue Shortfall
FY 2008
$ in Millions
Item Revenue Transfers Total Oct 2007 $ (406.7) 2.3 $ (404.4) Dec 2007 $ $ 61.6 (84.6) (23.0) Feb 2008 $ (339.0) (2.9) $ (341.9) Total $ (684.1) (85.2) $ (769.3)
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Association of Government Accountants
How Much Can Be Withdrawn from the Revenue Stabilization Fund?
A withdrawal from the Revenue Stabilization Fund may be possible in the event of a revenue shortfall. 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 $846.7* 2 = Potential Withdrawal $423.4
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Association of Government Accountants
Revenue Stabilization Fund FY2008
Chapter 847 Appropriated General Fund Revenue HB/SB 29 Revised General Fund Revenue Difference (Shortfall) February Revenue Shortfall February Budget Balancing Plan Balance items (Capital Reversions) Revenue Items (Interest and Corrections) Transfer items (DMV and Drug Assessments) Total Total Difference (Shortfall) 1/2 of Shortfall Withdrawal Original Withdrawal HB/SB29 Introduced Additional Withdrawal $ 17,641,285,296 17,118,999,140 (522,286,156) (339,300,000)
4,448,219 5,633,233 4,500,000 14,581,452 (846,704,704) 423,352,352 261,143,078 162,209,274
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Association of Government Accountants
The General Assembly is Including a $351.5 Million Withdrawal from the Revenue Stabilization Fund in FY 2008
Revenue Stabilization Fund -- June 30 Balance FY 1995-2007 Actual and FY 2008-2010 Forecast (millions of dollars)
1,400
1,190 1,065 1,098 1,215 1,165
1,200
1,000
800
575
716
600
472
482 340 247
400
224
361
200
80 85
157
0
FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
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Association of Government Accountants
Revenue Stabilization Fund Calculation for FY 2007
Tax (in millions) Percent Growth
Fiscal Year
2007
Individual
$9,787.8
Corporate
$879.6
Sales
$3,274.3
Total
$13,941.6
From Last Year 5.92307
Prior 6-yr Average 5.61722
Step 1 – Calculate difference between current growth and average growth for the prior six years
Current growth = Prior 6-yr avg. = Difference 5.92307% 5.61722% 0.30585%
Step 2–Take one-half the difference
0.5 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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Association of Government Accountants
Major Components of Plan to Deal With Revenue Shortfall
$ in Millions
Governor Use of FY2007 Balances Use Revenue Stabilization Fund Bond Existing Capital Outlay State Agency Cuts FY2008 FY2009 FY2010 Aid to Locality Reductions FY2008 FY2009 FY2010 Cash Flow Capital Projects Freeze Capital Projects State Employee Health Insurance Use Transportation Funds FY2009 $ $ 96.0 $ 422.9 300.0 5.50% 8.00% 8.00% 0.20% 5.60% 5.60% 33.9 180.0 Repay FY2010 80.0 $ House 148.3 $ 280.0 225.0 5.00% 5.00% 5.00% 0.20% 0.20% 0.20% 177.9 $ 141.2 62.9 Senate Budget Conferees 120.4 351.5 300.0 5.00% 5.75% 5.75% 0.20% 4.40% 4.40% $ 82.7 100.0 77.7 180.0 Bond FY2010 100.0 Bond
98.1 $ 422.9 300.0 5.00% 5.00% 5.00% 0.20% 0.20% 0.20% -
Maintenance Reserve
180.0 180.0 Bond Gas Tax+ FY2010 FY2009 150.0 72.0 Bond
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Association of Government Accountants
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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Association of Government Accountants
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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Association of Government Accountants
Other Budget Highlights (continued)
• 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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Association of Government Accountants
Other Budget Highlights (continued)
• 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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Association of Government Accountants
Other Budget Highlights (continued)
• 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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Association of Government Accountants
For more information on Virginia’s budget, visit our website at:
www.DPB.Virginia.gov
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