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How Governor McAuliffe plans to close $280 million budget shortfall

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RICHMOND, Va. -- Virginia Governor Terry McAuliffe announced his plan to close the 2017 state budget shortfall.

"We've come up with a reasonable plan that makes the necessary cuts, but also protects our core principles in order to drive the new Virginia economy," Governor McAuliffe said to open his remarks Thursday morning.

Governor McAuliffe said while state revenues have grown, they have grown more slowly than anticipated.

"Total general fund revenues rose by 1.7 percent in fiscal year 2016, for a total of $18 billion, but fell short of the official forecast of 3.2 percent growth by $268.9 million. The majority of the shortfall was due to withholding and sales tax collections. In addition, transfers to the general fund fell $10.4 million short of the forecast. The combined shortfall including general fund revenue and transfers in fiscal year 2016 totaled $279.3 million," according to the Governor's Office.

The governor said the loss of high-paying jobs to sequestration and defense spending cuts at the federal level has really changed the employment mix in Virginia. He added that he has helped create thousands of high-paying jobs which have not yet been filled.

He said filling those jobs would help create new tax revenue for the Commonwealth to the tune of an additional $100 million.

"There will be no program cuts to public education, Medicaid for our families most in need, nor our core public safety services," he said. "We did not kick our budget problems to local governments by reducing payments to cities, counties or towns. These are obviously difficult decisions to make and there may be more to come, but I am confident that the progress and investments we are making today will put Virginia on course for strong growth well into the future."

The Governor's Office outlined the plan in the following statement:

In order to reach the intended budget goal the administration implemented three primary strategies.

First, the state budget contained an automatic trigger based on the revenue forecast that removed $125.1 million for pay increases.

Second, there is a proposal to transfer $392.3 million from the revenue stabilization fund, as permitted by state law.

Third, there are pledges from state agencies in 2016 that provide an additional $23.5 million in savings.

The administration also will use $43.3 million in additional unspent fund balances from the end of fiscal year 2016 to help close the shortfall and will reduce operating expenses in the current fiscal year, with exemptions for core services like education, health care, and public safety, resulting in savings of $73 million.

Lastly, a variety of other revenue actions were taken to reach the goal.

They include a suspension in changes to the accelerated sales tax program, transfers of lottery revenues for public education, and the use of Literary Fund revenues to offset teacher retirement costs.

Click here to read the Governor's full plan.