State Budget Update
Scott Cummings
Virginia Department of Planning and Budget
1
Agenda
• Review of 2014 Appropriation Act
• Overview of HB 5010
• Next steps
2
2014 Appropriation Act
• Provides appropriation for FY2015 and FY2016
• Provided $156.1 million in FY15 and $248.0 million in
FY16 in new general fund support to Direct Aid over
the amount provided in FY2014
• With Lottery and Literary Fund support added in, new
state spending reaches $487.3 million for the biennium
• Revised K-3 Class Reduction Formula
– Creates savings of $5.2 million each year
– Uses a three-year average of free lunch eligibility rather
than a one year snapshot
• Eliminated funding for the Opportunity Educational
Institution (OEI)
3
2014 Appropriation Act
• Approved June 23, 2014
• Prior to the budget’s passage, state revenues
were not tracking with approved forecast
• Expected total of $1.55 billion shortfall
• Response:
– $842.5 million in general fund resources left
uncommitted in new biennium
– $707.5 anticipated Rainy Day Fund withdrawal
4
Interim Reforecast
• Based on the FY2014 shortfall, the Governor
called for an official reforecast
• Revised forecast presented August 15
• Forecast assumed lower growth rates than
were included in budget’s revised figures
• New anticipated shortfall of $881.5 million
beyond that predicted in 2014 budget
5
HB 5010, 2014 Special Session I
• General Assembly still in session
– Planned reconvene date of September 18
• Governor and General Assembly money
committees agreed on framework for action
• Provides sufficient time for state agencies to
implement FY15 reduction strategies
• Gives bond rating firms assurance that Virginia
is addressing its anticipated shortfall
6
Actions taken in HB 5010
• Amends and reenacts 2014 budget
– Governor’s proposed budget in December will
include HB 5010 changes
• Updates revenue assumptions
• Appropriates $470 million in FY15 and $235
million in FY16 from the Rainy Day Fund
• Establishes four reversion accounts to close
the remaining shortfall of $345.5 million in
FY15 and $536 million in FY16
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Net Effect of Revenue Shortfall and
Interim Reforecast
8
HB 5010 Reversion Accounts
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HB 5010 Agency Reductions
• Represents approximate cut on state agencies of
four percent
• Includes Department of Education, but not Direct
Aid budget
• On September 19, agencies submitted reduction
plans of five percent for FY15 and seven percent
for FY16
• The General Assembly has authorized agencies to
implement strategies, so they can begin once the
plan is approved by the Governor
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HB 5010 Aid to Locality Reductions
• Savings amount of $30 million each year
– Represents 0.3 percent reduction in total local aid
contained in the budget
• Localities will be given flexibility in
determining impact of reduction
• DPB will establish a target for each locality
– Depends on locality’s share of total aid, likely
excluding K-12 and possibly car tax
reimbursements
11
HB 5010 Miscellaneous Reversion
Clearing Account
• Includes net spending adjustments of $40.6
million in FY15 and $284.9 million in FY16
– From a series of balance reversions, transfers and
other actions
• Actions to achieve FY16 savings of $272
million will be submitted in the Governor’s
introduced budget for consideration by the
2015 General Assembly
• All actions are on the table for consideration
12
Next Steps
• HB 5010 will be approved
• Governor will announce FY15 reductions
strategies proposed by state agencies
• DPB will notify localities of their share of the
reduction amount
• Governor will submit introduced budget to
General Assembly on December 17
– Contain remaining actions to address budget shortfall
– Include updates to Direct Aid based on latest
enrollment figures and program participation levels
– Be based on November revenue forecast
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