RICHMOND, VA (WWBT) - Despite finishing the year with positive general fund growth when compared to last year, the Governor's Office announced Friday that they fell short of their official budgetary forecast, resulting in a multi-million dollar shortfall.
According to the Governor's Office, the Commonwealth finished approximately $266.3 million short of the official forecast. That shortfall will also mean that state and state-supported local employees will have their pay raises delayed, which were previously scheduled for December 1.
One of the factors that may have contributed to the budget shortfall was payroll withholding and sales tax collections, which make up 85 percent of the Commonwealth's total revenues, finished two percent below forecasts.
Based on Preliminary Data
- Total general fund revenue collections, excluding transfers, were short of the official forecast by $266.3 million (1.5 percent variance) in fiscal year 2016.
- The 25 year average general fund revenue forecast variance is plus or minus 1.5 percent.
- Payroll withholding and sales tax collections, 85 percent of total revenues, and the best indicator of current economic activity in the Commonwealth, finished 2.0 percent below forecast.
- Estimates for these two sources are directly tied to the economic outlook developed during the fall forecasting process, and specifically, the outlook for jobs and wage income in the Commonwealth.
- Payroll withholding growth of only 2.4% seems to have been affected by the addition of jobs in lower wage categories and increases in part-time employment.
Additionally, the Commonwealth looks at the "very wet Spring" season as a factor that "contributed to lower sales tax growth of 1.9 percent, as home construction and home furnishing and fixtures are a significant portion of taxable retail sales."
The final fiscal year 2016 tally will not be available until August 26th when it will be released to a Joint Legislative Money Committee meeting.
"Although these results indicate that our economy continues to grow in the wake of the recession and sequestration, they also underscore the necessity of continuing our work to diversify the Virginia economy and create more and better paying jobs in the state," said Governor Terry McAuliffe after the State Comptroller's report was revealed.
"We are having significant success bringing more than 135,000 net new jobs to the Commonwealth that are helping to buoy our revenue collections, but we have more work to do to build the new Virginia economy that will result in greater opportunity and budgetary certainty in the future," he continued. "The bipartisan budget that we worked with the General Assembly to pass, which invests in many the priorities we need to stimulate that growth, will serve as a good foundation for the work we will do together to meet these challenges and continue our upward economic trajectory."
Along with McAuliffe, House members shared their thoughts on the multi-million dollar shortfall.
"The General Assembly adopted a conservative and responsible budget based on unanimous revenue projections presented to the Governor and the General Assembly. Unfortunately, Virginia's economy is not keeping pace and state tax revenues fell short of those projections," said House Speaker William J. Howell (R-Stafford).
"The economy is significantly weaker than top-line unemployment figures suggest, and the revenue shortfall is ample evidence of that. In the long term, we must redouble our efforts to diversify and strengthen Virginia's economy," Howell added. "In the short term, Chairman Jones and Vice Chairman Landes will immediately begin working with Secretary Brown and the administration to address the budget shortfall."
[endif]"The revenue shortfall is the disappointing effect of a still-struggling economy," said House Appropriations Committee Chairman S. Chris Jones (R-Suffolk). "The payroll withholding data reflects troubling trends in employment. Unfortunately, Virginians are trading high-paying jobs for lower-paying jobs or are working part-time when they should be working full time. We budgeted conservatively, but the revenue just did not come in."
The Governor asked state agencies to "conserve resources" in order to help offset a future shortfall, and meetings with the Joint Advisory Board of Economists have been tentatively scheduled for July 15 and the Governor's Advisory Council on Revenues Estimates planning to meet on August 15.
McAuliffe said the revised forecast will be prepared by September 1.
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