Revenue rose 5.3 percent in Virginia during August from a year ago, but is still short of projections — a sign that the state still faces an uphill climb in a weak economy.
A 4.5 percent increase in individual income tax withholding helped drive the increase, but year-to-date revenues fell 5.7 percent, short of the forecast of 2.6 percent annual growth.
Gov. Bob McDonnell called the increase a “small, but positive” sign for the state’s economy.
“However, this remains a tough fiscal environment overall,” he said. “We will know far more about our revenue picture, and what impact it will have on the biennial budget, after we see September’s numbers.”
Even accounting for an accelerated sales tax program that pushed some payments from July to June, total revenues grew 3.3 percent through August — short of a forecast of 4.2 percent growth, according to Secretary of Finance Richard Brown.
September collections will complete the first quarter of fiscal 2011 and provide a better assessment of revenue growth, Brown wrote in a memo to McDonnell.
Virginia has made waves for posting a surplus of about $403 million for the fiscal year ending in June, and, as a result, McDonnell was able to award bonuses to state employees for the first time since 2007. But general fund revenues still slipped 0.7 percent — less than the forecast 2.3 percent drop.
To shore up the commonwealth’s finances, the state is now searching for ways to streamline operations and save money. One recommendation from McDonnell’s government reform commission would be to switch the workweek for some state agencies to a four-day, 10-hour schedule to save on energy costs.
Another, much more high-profile plan is to privatize Virginia’s state-run liquor stores. The plan would triple the number of stores selling hard liquor in the state. The commission is scheduled to consider the proposal at its Oct. 4 meeting.
The state collected about $4.6 million in alcoholic beverage sales in August, which includes the beer and beverage excise tax and alcoholic beverage state tax — 8.2 percent more than last August. The sales, however, account for only about 1 percent of general fund revenue.
