Governor Bob McDonnell today signed, without any vetoes, the final caboose budget for FY 2012. He received both the FY 2012 caboose budget and the final biennial budget for FY 2013-2014 as passed by the General Assembly on Wednesday, May 23rd. In keeping with his intention to quickly finalize the budget, the governor plans to act on the FY 2013-2014 biennial budget in the days ahead.
Speaking about signing the caboose bill today, Governor McDonnell commented, "Upon final passage of both the caboose bill and new FY 2013-2014 biennial budget, I said that I would act quickly, and in a limited manner, to finalize both budgets so that Virginia's localities would be able to budget prudently for the coming years. The enactment of the caboose budget bill will allow us to proceed with the essential business of the Commonwealth in a timely and fiscally responsible way, which has been characteristic of our tradition of sound fiscal operations in Virginia. I intend to take final action on the FY 2013-2014 budget in the days ahead."
With the signing of the caboose budget bill (HB1300) today, Governor McDonnell ensures that some significant actions can be fulfilled by the end of the fiscal year. The caboose bill will complete the allocation of $67.2 million from last year's budget surplus to transportation as planned. It also contains increased funding for per diem payments to local and regional jails to pay the costs of the housing state prisoners in those facilities. The extra $5.8 million for this purpose will ensure that localities get paid what they are due for holding state prisoners and that such payments are made on a timely basis so as not to negatively impact local budgets.
Furthermore, the caboose bill sets up the Federal Action Contingency Trust Fund or FACT Fund as a reserve against the adverse effects of future adjustments in federal fiscal policy. The FACT Fund can be used to address impacted localities in funding needs associated with the recommendations of the 2005 Base Realignment and Closure Commission (BRAC) or any subsequent BRAC recommendations; to continue statutorily required federally mandated services at the present level if federal budget reductions are imposed; or, unique economic development opportunities to expand the Commonwealth's ability to attract businesses in targeted sectors to help transition industries negatively affected by federal budget reductions or BRAC recommendations. The FACT Fund was well received by Wall Street as a prudent action to guard against the potential negative effects of federal actions on Virginia when the Governor announced his intent to create the fund last summer.
Importantly, the caboose bill will also allow the Commonwealth to proceed on course to roll back the accelerated sales tax collection program which was put into place during the midst of the Great Recession. Governor McDonnell has promised to phase out this program which changes the sales tax payment schedule for merchants during the month of June by requiring them to make two payments of sales tax collections to the state during that month instead of the one payment normally required for other months. The action in the caboose bill provides an extra $50 million as the second installment in phasing out the accelerated sales tax program. With this new funding, approximately 96% of the affected merchants will be relieved of making the extra, accelerate sales tax payment this June.
Finally, the final passage of the caboose budget bill restores budget cuts of $10 million for higher education. This restoration had been placed on hold as a result of the delayed budget deliberations increasing uncertainty for institutions of higher education at a time when they have asked to hold tuition increases down.