The state of Virginia closed out its 2016 fiscal year with a $266.3 million budget deficit, according to the official state economic forecasts.
As CBS affiliate WTRV reported, Virginia actually hit a new record for annual gross receipts in 2016, adding up to positive general fund growth. However, even with the revenue, the state fell short of its budgetary forecasts and will need to cut spending. In response to the shortfall, the state has delayed pay increases that were slated for state employees on December 1. These increases will not move forward until the budget has been reassessed by legislators.
“Preliminary figures indicate that the state concluded fiscal year 2016 with 1.7 percent growth in general fund revenue collections, excluding transfers, but faces an approximate $266.3 million shortfall from the official forecast,” Gov. Terry McAuliffe’s office said in a statement.
“Any shortfall exceeding 1.0 percent requires a re-estimation of general fund revenues.”
The shortfall is a 1.5 percent variance from the official state forecast. Under the Code of Virginia, any shortfall exceeding 1 percent requires a re-estimation of general fund revenues, which the state will have to complete by September 1.
Speaking with the Augusta Free Press, State Representative William J. Howell said that despite the legislature’s attempts to adapt a fiscally conservative budget for 2016, Virginia’s economy was not able to keep pace with economic projections.
“The economy is significantly weaker than top-line unemployment figures suggest, and the revenue shortfall is ample evidence of that,” Howell told reporters. “In the long term, we must redouble our efforts to diversify and strengthen Virginia’s economy. 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.”
Economic diversification and investment
As McAuliffe noted in a statement, Virginia added approximately 135,000 net new jobs in fiscal year 2016. However, the governor said that the state could benefit from further efforts to diversify its economy and attract higher-paying employers.
One area that will likely receive increased economic support under the state’s new spending plan for fiscal years 2017 and 2018 is agriculture. Speaking with Lancaster Farming magazine, State Secretary of Agriculture and Forestry Todd Haymore said the state is planning to set aside around $107 million for the agriculture department in the 2017 fiscal year and close to $108 million for fiscal year 2018. This marks the largest state investment in economic growth for farming.
“The agriculture department will use the funds to attract large-scale agricultural investment to the state.”
In addition to microgrants to support existing small-scale farm operations, the department will also be using the funds to attract larger scale agricultural investment to the state. The governor worked to bring a new egg processing operation to the town of Berryville. The plant’s owners have signed a three-year, $50 million contract to purchase Virginia-sourced eggs from more than 100 Virginia farms. Additionally, the plant itself is expected to create more than 100 new jobs in the northern part of the state.
How Questica can help in economic balancing
In order to prioritize economic stimulus spending with lower-than-anticipated state revenue, lawmakers must make careful and highly informed financial decisions. With Questica’s web-based, streamlined software, lawmakers and state agencies can use advanced planning tools that enable careful examination of proposed budgets. Questica’s public sector budgeting platform offers easy sharing tools and real-time data that eliminate guesswork and inefficiency and improve accuracy and collaboration.
States wanting to establish and manage performance objectives, such as economic diversification or job growth, can use Questica to collect financial and statistical data from multiple sources to effectively measure performance.
Questica’s unique tools easily track individual data values over defined periods and allow users to set up warnings or alerts when results are not meeting established objectives. Additionally, current spending can be tracked through Questica’s advanced budgeting tools, including salary and position tracking, to accurately model and forecast all costs associated with positions and employees. Through these combined tools, states can hit performance goals while also seeing how spending controls, such as pay freezes, are impacting efforts to overcome deficits.
States working on balancing their fiscal year budgets should contact Questica to learn how advanced budgetary software aids in sound decision making.