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The governor said the state has several contingency funds that could be tapped.
Tuesday, October 1, 2013
Gov. Bob McDonnell said he doesn’t expect the looming federal government shutdown to interrupt specific state services, but his administration is bracing for a fiscal impact that could have ripple effects on Virginia’s budget.
In a news conference Monday afternoon, McDonnell said as many as one-third of the state’s 172,000 civilian federal employees could be furloughed if the federal government shuts down. That would take a bite out of individual income tax revenues, which make up about two-thirds of the state’s general fund. Secretary of Finance Ric Brown said extended furloughs also could have a drag on sales tax proceeds.
Federal funds account for about 20 percent of the state’s budget, Brown said. Only about one-third of those funds go toward discretionary programs that would be affected by the shutdown, Brown said. Those include grants for social services, child care development and weatherization projects, he said.
McDonnell said he has “several options” at his disposal to supplant the loss of federal funds if the shutdown persists.
The state created a Federal Action Contingency Fund two years ago in anticipation of federal spending cuts, and it has about $13 million that could be used right away. The governor also could tap a separate economic contingency fund that has about $2 million. McDonnell said he also could turn to a largely unused tool called an “authorized deficit loan,” an option he described as a last resort.
“At this point we don’t intend to do any of these things, but I want people to know that if we get past Friday, Oct. 4th, then some of these tools may have to be tapped,” McDonnell said.
State agencies have until Friday to evaluate specific impacts of the federal shutdown, he said.
McDonnell and state legislative leaders are scheduled to travel to New York on Thursday for an annual meeting with Wall Street ratings agencies. Virginia has retained its coveted AAA bond rating while weathering the recession and the effects of the federal budget sequester.
“We’re going to tell them everything that we can to explain to them why our AAA bond rating should continue unabated,” McDonnell said.
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