For the first time in six years, Virginia state employees will receive a pay raise thanks to a revenue surplus, the fourth in as many years.
Gov. Bob McDonnell's administration announced the $262 million general fund surplus on Friday. The final size of the surplus won't be known until the state tabulates unspent balances returned by agencies and other savings swept back into the treasury after fiscal year 2013 expired at midnight on June 30.
While employees received one-time bonuses last year and in 2010, this year's raise is the first permanent increase in base salaries for state government personnel since 2007, before two years of deep revenue declines tied to the worst economy since the Great Depression.
Most of the surplus is already spoken for under state law, which directs a share to replenishing the "rainy day'' reserve fund, the Water Quality Improvement Fund and the raise, which will first show up in paychecks issued Aug. 16.
"It's a recognition by the General Assembly that's long overdue. Virginia didn't get all the recognition it's received over the years for `best managed state' or `best state to do business' without good people working for state government,'' said R. Ronald Jordan, executive director of the Virginia Governmental Employees Association.
More anticipated than the raise, however, is a remedy for ``salary compression'' for senior employees who saw their wages stagnate over the years while starting pay increased, allowing new hires to quickly catch and even surpass veteran state personnel.
State workers with five or more years' tenure will see their annual salaries increase by $65 for each year in government up to a cap of 30 years. That means a 30-year employee would receive a $1,950 annual boost on top of the standard raise.
The raises were authorized in the revised state budget lawmakers passed in February contingent on a sufficient year-end surplus.
Total general revenue collections for the year increased 5.3 percent, easily beating the 3.6 percent growth forecast on which budgeted fiscal year 2013 spending was based. The administration credited strong growth in taxes paid largely by the self-employed or on dividends, lower refunds and robust growth in a tax that reflects a resurgent real estate market.
Four years of unspent balances is something Virginia last achieved about 20 years ago under former Gov. George Allen. McDonnell's surpluses were aided in part by deep cuts in his first year _ many of them contained in the budget former Gov. Tim Kaine submitted a few weeks before leaving office - and the state's "rainy day'' reserves.
State revenues had taken a beating since the national economic downturn, starting with the housing market and mortgage banking crisis and worsening with the next year's stock market meltdown. Investments and retirement accounts tanked while unemployment ballooned. Kaine's administration bore the brunt of the hard times as he and the General Assembly reconciled more than $7 billion in shortfalls.
During Kaine's 48 months in office, from 2006 to January 2010, Virginia experienced 23 months in which general tax collections were lower than the amounts collected the same month one year earlier. At the depth of the fiscal crash in early 2009, the state experienced five consecutive months of declines averaging 15.6 percent.
"When I came into office, Virginia faced a stark economic forecast,'' McDonnell said in a news release. "We set an important standard of conservative budgeting and conservative spending. We made tough decisions, cut back where we needed to, consolidated boards and agencies, reduced the number of state employees by over 2,000 and invested in areas that would produce economic growth.''
If not for some fiscal sleight of hand, however, fiscal year 2011 would have finished deeply in the red. McDonnell and the 2010 General Assembly deferred more than $600 million in state contributions to Virginia's underfunded public pension system to free up cash needed to close a $4.6 billion budget shortfall.
McDonnell, now in the 43rd month of a term that ends Jan. 14, has experienced 11 months of revenue declines, five of them in the past year.
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