Cap on Rainy Day Fund raised in 2010 referendum
Campaigning for governor in 2009, Bob McDonnell said the economic downturn proved the state needed a bigger financial cushion for lean times.
"I will call for an increase in the allowable size of the Rainy Day Fund, to help further buttress the commonwealth against the difficult times that we must always be prepared for,” McDonnell said in a September 2009 policy paper.
The fund, started in 1994, collects money during good financial years. It can be drawn down to help balance the state budget during bad times when general tax revenues fall more than 2 percent below projections.
The maximum allowable size of the fund in 2009 was 10 percent of the annual average income and sales tax revenues the state received over the previous three fiscal years, or roughly $1.4 billion. If that cap was reached during good times, the state would stop making deposits.
The General Assembly, in early 2009, tentatively approved a referendum for a state constitutional amendment that would increase the maximum size of the fund to 15 percent of the tax revenues, or about $2.1 billion. Lawmakers were scheduled to hold a final vote on allowing the referendum in 2010.
McDonnell, in his policy paper, said he supported the amendment expanding the allowable Rainy Day Fund. Legislators, in early 2010, unanimously approved the referendum and McDonnell, as governor, signed the measure that put the amendment before voters.
That November, Virginians narrowly approved the amendment.
The Rainy Day Fund hit a high water mark of almost $1.2 billion in 2007. The state made large withdrawals during the recession and the balance dropped to $295.2 million in 2010.
On June 30, the end of the 2012 fiscal year, the fund is projected to have a balance of $302.3 million, which is about 15 percent of its maximum allowable size, according to Taylor Thornley, a spokeswoman for the governor. A two-year budget approved by the General Assembly this spring calls for the fund to grow to $609.2 million by the end of fiscal 2014 -- about 28 percent of its maximum.
But let's get back to McDonnell's pledge to call for an increase in the allowable size of the fund. He signed the measure that put the amendment on the ballot and voters passed it, so we rate this a Promise Kept.
McDonnell for Governor, "McDonnell and Bolling unveil budget and spending reform plan,” September, 2009.
E-mails from Taylor Thornley, spokeswoman for Gov. Bob McDonnell, June 4, 2012 and June 11, 2012.
Interview with Ric Brown, Virginia secretary of finance, June 11, 2012.
Ballotpedia.org, "Virginia Revenue Stabilization Fund amendment, question 3 (2010),” accessed June 4, 2012.
Legislative Information System, "SB 362 Constitutional amendment; limit on taxes or revenues and Revenue Stabilization Fund,” accessed June 4, 2012.
Governor Bob McDonnell, "Governor McDonnell unveils 2013-2014 budget,” December 19, 2011.
Governor Bob McDonnell, "Governor McDonnell's proposed 2012-2014 budget,” page 17 Dec. 19, 2011.
The Commonwealth Institute, "Building a better Rainy Day Fund,” February 2011.
Washington Post, "Rainy day fund constitutional amendment only barely passes,” November 4, 2010.