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Outgoing Virginia governor unveils $96 billion biennial budget

Virginia Governor Bob McDonnell speaks at the Conservative Political Action Conference (CPAC) during their annual meeting in Washington, Feb
Virginia Governor Bob McDonnell speaks at the Conservative Political Action Conference (CPAC) during their annual meeting in Washington, Feb

WASHINGTON (Reuters) - Outgoing Virginia Governor Robert McDonnell proposed a $96 billion biennial budget on Monday that forecasts continued revenue growth and lays out a plan to bring the state's rainy-day fund to $1 billion by fiscal 2016.

Democrat Terry McAuliffe will occupy Virginia's executive office when the statehouse begins debating the budget in January. Because of state law, though, legislators will work off the proposal drafted by McDonnell, a Republican whose term ends this year.

"This is not the point where an outgoing governor would usually embark on major new programs, but rather a time to solidify past policy initiatives. My budget makes room for both," McDonnell said in remarks to state legislators.

Virginia's revenue will likely grow 4.2 percent in the fiscal year beginning July 1 and 3.9 percent in the following year, he said. That will allow spending to increase by about $10 billion from the last biennial budget.

In the plan, McDonnell left $50.9 million free to give Governor-elect McAuliffe spending flexibility. He said it was the state's largest unappropriated balance since 1991.

A spokesman from McAuliffe's office did not respond to requests for comment on the budget. In a statement released to local media, however, the spokesman said that it includes many items "that will make Virginia a better place to work, live and do business," and that McAuliffe is "already closely examining" it.

The budget forecasts capital spending and debt to rise slightly over the two years. Total outstanding debt is expected to reach $11.86 billion in fiscal 2016, compared with the $10.8 billion outstanding this fiscal year. Spending is expected to increase to $48.59 billion from $44.62 billion. The budget also puts $196.7 million aside for debt service.

"I believe we need to take a breather from issuing significant new debt until we have a better understanding of Virginia's future economy," McDonnell said.

Medicaid, the health insurance program for the poor that is partially reimbursed by the federal government, now makes up more than a fifth of Virginia's spending and is "the fastest growing major program in our operating budget," McDonnell said.

Over the biennium, Virginia will have to spend $674 million more despite slower enrollment growth, McDonnell said, adding that the budget also does not include an inflation increase for hospitals participating in Medicaid in fiscal 2015.

"While the Medicaid forecast does include some funding for an anticipated increased enrollment from the federal exchange, we have seen little impact due to the major exchange implementation issues," he said.

(Reporting by Lisa Lambert; editing by Matthew Lewis)

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