McAuliffe, Lawmakers Announce Plan to Fix $2.4 Billion Shortfall

The Democratic Va. governor and Republican legislative leaders released details Monday of a plan to fix a $2.4 billion budget shortfall by tapping the state’s rainy day fund and cutting spending for state agencies, higher education and local governments by up to 3.5 percent.

Gov. Terry McAuliffe, Speaker Bill Howell, House Appropriations Committee Chairman Chris Jones, Senate Finance Co-Chairman Chuck Colgan and leaders of the GOP-controlled House announced a bipartisan agreement on how to handle Virginia’s budget shortfall Monday at a Capitol news conference. The plan will not affect funds set aside for K-12 education, though virtually every other state and government office will face steep cuts.

The plan calls for cutting $192 million for state agencies, $90 million for higher education and $60 million for aid to local governments over the next two years. The agreement also sets forth the following proposals:

• Appropriate transfers from the Revenue Stabilization Fund, or Rainy Day Fund (est. $470 million in FY15 and $235 million in FY16)
• Reduce aid to state agencies by $92.4 million in FY2015 and $100 million in FY2016
• Reduce aid to higher education by $45 million over the next two years
• Reduce aid to localities by $30 million per year over the next two years
• Set aside $272 million in other actions in FY16 (Gov. McAuliffe will address when he introduces his budget amendments in December)

“Virginia stands at an economic crossroads and the decisions we make today will affect the Commonwealth for years to come,” said Governor Terry McAuliffe. “...While the budget shortfall is forcing us to tighten our belts, I am proud that we were able to protect many of our core democratic priorities, including health care and K-12 funding for this fiscal year.”

McAuliffe announced a $2.4 billion projected budget shortfall in August, causing the loss of thousands of jobs and billions in revenue. McAuliffe attributed the shortfall to mandatory cuts in defense spending that took effect after the 2013 budget sequestration.

“We have once again proven just how big a difference 90 miles can make. While Washington continues to kick the can down the road, Virginia is demonstrating that elected leaders can work together, make tough decisions, and find ways for government to live within its means,” House Speaker William Howell (R-Stafford) said in a written statement.

The plan will be brought before legislators Thursday during a special session originally slated for discussing Medicaid expansion and judicial appointments.