Governor's budget includes $438 million for K-12 education

Gov. Bob McDonnell this morning unveiled his first two-year budget, an $84.9 billion spending plan for 2013-14 that infuses public schools with $438 million, provides a larger cushion for potential federal cuts and fattens the rainy day fund.

It includes his previously announced wishes to spend an additional $2.2 billion on state employee and teacher pensions, provide $100 million a year for higher education and divert more sales tax revenues to transportation.

“This is a budget marked by tough decisions demanded by this difficult economy," McDonnell said this morning in an address to the legislature's money committees at the state Capitol. The standing-room-only crowd included Richmond Mayor Dwight C. Jones.

"Virginia citizens and businesses live on budgets and make tough decisions every day," McDonnell said. "Richmond must continue to do so as well. It is critically important that we do. When we live within our means and make government work better, we create the conditions in which private sector job creation can flourish and the citizens of Virginia can innovate, achieve and find the opportunities for success they need and deserve.”

McDonnell's plan, which does not include tax increases, is built on expected revenue growth of 3.3 percent in fiscal year 2013 and 4.5 percent in 2014.

On the other side of the balance sheet, McDonnell carves out about $882 million in reductions -- $84 million from cuts at state agencies. The other $799 million would come mainly through public education and Medicaid.

On the latter, more than $300 million stems from withholding normal inflation costs for hospitals, nursing facilities, outpatient rehabilitation facilities and home health providers. Provider rates would stay the same.

In public education, McDonnell would not provide for inflation for non-personnel services and costs. He proposes scrapping so-called "cost of competing" adjustments made for non-instructional staff in some localities, mainly Northern Virginia.

He suggests reducing funding for the Virginia Preschool Initiative by using different membership projections.

Still, public education would receive $438 million in net new funding over the two years in his plan. That includes more than $913,000 each year to pay testing fees for all 10th grade students enrolled in a public school to take the preliminary SAT exam.

McDonnell would add a new requirement that schools report what percentage of their budget is spent on instruction. He campaigned on putting more money into the classroom, with a goal of reaching 65 percent.

 A major budget driver is Medicaid, and $650 million is included in his plan over the biennium.

McDonnell had previously unveiled his transportation funding plan, which, among other things, would incrementally increase the portion of the state sales tax dedicated to transportation to 0.75 percent from 0.5 percent over the next eight years. It would first increase to 0.55 percent for the coming two-year budget, and McDonnell's office estimated that first increase could generate an estimated $110 million over the two years.

The governor wants to add another $20 million to the Federal Action Contingency Trust Fund, designed to help the state counteract impacts from federal budget cuts. That would be in addition to the $30 million in seed money he proposed allocating from the surplus.

His proposed budget also would:

-- reduce by $25 million the amount cut in aid to localities

-- add $30 million to the behavioral health trust fund

-- provide $11.7 million in 2013 linked to legislation he intends to propose to stiffen penalties on repeat drug dealers

-- spend $40 million on economic development, including $10 million for a new biosciences research consortium to include Virginia Commonwealth University among other schools

-- increase the so-called rainy fund by $132 million in 2013 and $168 million in 2014

-- eliminate $7.2 million for public broadcasting, something McDonnell has tried before

-- offer $5 million over the two years for land conservation

-- give a 3 percent bonus to full-time state employees in December 2012 if savings goals are met

The legislature, with a new political dynamic following the November elections, will tackle the governor's budget during this upcoming General Assembly session, which starts Jan. 11. ‬