Budget

Virginia Finishes Fiscal Year 2021 with Record-Breaking $2.6 Billion Surplus

Revenue collections surged 26.4 percent between April and June, resulting in largest budget surplus in Virginia history

RICHMOND—Governor Ralph Northam today reported that Virginia reached the end of fiscal year 2021 with an historic $2.6 billion surplus, the largest in the Commonwealth’s history. Total revenue collections soared 14.5 percent over fiscal year 2020, ahead of the forecast of 2.7 percent growth.

“We have effectively managed Virginia’s finances through the pandemic, and now we are seeing the results—record-breaking revenue gains, a recovery that has outpaced the nation, and recognition as the best place to do business,” said Governor Northam. “Fueled by a surging economy, federal American Rescue Plan funds, and the largest surplus in Virginia history, we have significant resources available to make transformational investments in this Commonwealth. I look forward to working with the General Assembly in the fall to seize this opportunity so we can build a brighter future for all Virginians. ”

All major general fund revenue sources exceeded their forecasts for the fiscal year. Individual nonwithholding taxes, one of the Commonwealth’s most volatile revenue sources, accounted for about half of the surplus, although collections in payroll withholding, sales, and corporate income taxes were also well above their respective forecasts.

Total revenue collections reached $8.6 billion in the final quarter of fiscal year 2021. In June, revenues decreased by $180.8 million, or 5.8 percent, compared to the previous year, which can be attributed to the extension of the individual income tax filing deadline to May 17.

“We expected a strong revenue performance and this surplus is even larger than initially anticipated,” said Secretary of Finance Joe Flores. “We are encouraged that for the fiscal year, payroll withholding and retail sales taxes increased by 6.4 percent signifying that Virginia’s underlying economic foundation is strong.” 

The Commonwealth will release the final figures for fiscal year 2021 on August 18 at the Joint Money Committee meeting.

Analysis of Fiscal Year 2021 Revenues
Based on Preliminary Data

  • Total general fund revenue collections, excluding transfers, exceeded the official forecast (Chapter 552) by $2.6 billion (11.7 percent variance) in fiscal year 2021.
    • The 30-year average general fund revenue forecast variance is 1.6 percent.
  • Payroll withholding and sales tax collections, 80 percent of total revenues, and the best indicator of current economic activity in the Commonwealth, finished $560.2 million or 3.3 percent ahead of the forecast.
    • Payroll withholding grew by 4.7 percent, exceeding the forecast of 2.7 percent growth.
  • Sales tax collections increased 12.4 percent as compared to the annual forecast of 4.7 percent. Brick and mortar store sales increased 7.6 percent and internet sales increased 32.3 percent.
  • Fourth quarter results show that payroll withholding and sales tax grew 12.5 percent.
  • Nonwithholding income tax collections finished the year ahead of expectations, up 37.1 percent. This was mainly due to a 68.0 percent increase in final payments to the Department of Taxation. Estimated payments increased 19.8 percent.
  • Individual income tax refunds were a positive to the forecast as the average check size did not increase. Tax refunds were $339.4 million below expectations, a positive to the bottom line.
  • Corporate income tax collections increased 49.8 percent for the year, ahead of the annual forecast of 27.4 percent. A preliminary analysis of the data reveal a broad based increase from larger corporations based on economic related growth.
  • A complete analysis of all final receipts for revenue sources, including transfers, will not be available until the Joint Money Committee meeting on August 18.

Governor Northam Announces Refinancing Plan to Save Virginia Colleges and Universities More Than $300 Million Over Next Two Years

FAIRFAX—Governor Ralph Northam today announced a higher education refinancing plan that will save Virginia’s public colleges and universities more than $300 million over the next two years. The Commonwealth of Virginia will take advantage of low interest rates by refinancing bonds issued by the Treasury Board of Virginia (TBV) and the Virginia College Building Authority (VCBA), which institutions of higher education use for capital projects. The Governor was joined by George Mason University President Dr. Gregory Washington and state legislators for the announcement at the university’s Fairfax campus.

“The COVID-19 pandemic continues to have tremendous impacts on higher education, including the fiscal health of our colleges and universities,” said Governor Northam. “Families all over the country are taking advantage of record low interest rates to refinance their home mortgages, and we want our public institutions to benefit as well. Refinancing will free up millions of dollars in savings allowing our colleges and universities to make critical investments, meet the needs of Virginia students, and continue offering a world-class education.”

Virginia has successfully avoided cuts to higher education during the pandemic. The Commonwealth has worked hard to maintain its valued AAA bond rating, which has allowed the state to be eligible for these favorable interest rates.

“Our public higher education institutions are critical to Virginia’s success, and we know they are hurting right now,” said Senate Finance Committee Chairwoman Janet Howell. “Allowing them to refinance some of their debt is an innovative way to save money when they need it most, and I look forward to supporting the legislative portion of this proposal next session.”

Many Virginia colleges and universities have seen a decline in revenue traditionally used for bond payments. These institutions are also navigating uncertainty regarding in-person learning, with many unsure when or how students will return to campus. Under the Governor’s plan, institutions will make no principal payments on their VCBA bonds through fiscal year 2023. The proposed restructuring would also extend institutions’ payment plans for two years beyond their current schedule, for both VCBA and TBV bonds.

“As stewards of the Commonwealth’s finances, we are always seeking creative solutions to financial issues,” said House Appropriations Committee Chairman Luke Torian. “Helping public colleges and universities restructure their debt obligations allows them to focus their resources on the pressing needs they face right now as a result of the pandemic.”

As part of his plan, Governor Northam will work with the General Assembly to allow additional flexibility for higher education refinancing during the 2021 General Assembly session.

“Governor Northam is committed to supporting Virginia’s institutions of higher education,” said Secretary of Finance Aubrey Layne. “These savings will make a tremendous difference for our colleges and universities as they navigate these challenging times.”

The following savings are expected:

  • Christopher Newport University: $14.4 million
  • George Mason University: $58.3 million
  • James Madison University: $43.7 million
  • Longwood University: $8.2 million
  • Norfolk State University: $8.2 million
  • Old Dominion University: $29.8 million
  • Radford University: $5.1 million
  • Richard Bland College of William & Mary: $320,000
  • University of Mary Washington: $9.3 million
  • University of Virginia: $344,000
  • Virginia Commonwealth University: $23.1 million
  • Virginia Community College System: $9.7 million
  • Virginia Military Institute: $2.8 million
  • Virginia Polytechnic Institute and State University: $40.1 million
  • Virginia State University: $12.8 million
  • William & Mary: $33.7 million
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