Frugal spending

Virginia ended its last fiscal year on June 30 with a surplus of $311 million, according to Gov. Bob McDonnell.

"For too long, elected officials from both parties have overpromised and overspent, and the result is the fiscal crisis we see unfolding in Washington, D.C.," said McDonnell at a Tuesday news conference. "Here in Richmond, we are committed to implementing a culture of fiscal responsibility and restraint in our state government."

After three years of revenue shortfalls, Virginia cut spending and used federal stimulus cash to balance budgets over the past two years.

"The Commonwealth, like our families and businesses, is living within its means," said McDonnell.

The draft analysis of final revenues from 2011 showed that the general fund collections reached $15.45 billion, exceeding official estimates. Most of the surplus comes from income tax collections that exceeded forecasts by almost $200 million.

Taxes withheld from individual paychecks account for almost two-thirds of Virginia's general fund, totaling $9.63 billion last fiscal year. Income tax withholding covers health care services, law enforcement, education and public safety.

McDonnell cited several factors contributing to the surplus, including: conservative budgeting, low taxes, job-creating programs, Virginia's pro-business environment, the state's strong Right to Work law and government-limiting litigation.

"State government must continue to do its part to control spending and look for new opportunities to innovate, restructure and save taxpayer dollars," McDonnell said. "We still have much work to do before we are completely out of this tough economic period, and unfortunately federal issues continue to threaten the positive advances we are making in the states."

Revenue from corporate income taxes grew by 3 percent, heftily beating the projected decline of 5 percent from fiscal year 2010 collections. While retail sales taxes dropped by 2.3 percent, the decline was still better than the official forecast for a 3.7 percent drop.

Virginia has enjoyed revenue surpluses of more than $700 million in the first two years of McDonnell's administration.

"It is a significant improvement over where we were when we took office," said Lieutenant Gov. Bill Bolling. "While we can be pleased with the success we have enjoyed in getting the Commonwealth's financial house back in order, we will continue to face significant budget pressures in the years to come, most significantly the uncertain economic environment on a national basis."

The majority of the excess money is already designated to specific projects, such as the Chesapeake Bay cleanup, according to the Virginia Constitution and state law.

Secretary of Finance Ric Brown detailed the targets of the surplus funds at the Tuesday press conference. The state government will designate $146.6 million to the Revenue Stabilization Fund, $32.2 million to the water quality fund, $23 million to transportation, $8.9 million to interest on unemployment compensation due to the federal government, $4.3 million for tornado relief, and $7.4 million for supplemental public safety funding for sheriff's offices.

Detailed figures for June, the last month of the 2011 fiscal year, will be available next month when McDonnell updates the House and Senate budget-writing committees.

The Associated Press contributed to this report.

Join the conversation on this article.

Follow us on Twitter and Facebook today!