Governor sees long journey to prosperity

The $403 million surplus announced in Richmond last week is one sign the economy’s improving, said Gov. Bob McDonnell during a Wednesday morning Chamber of Commerce breakfast at Old Hickory Golf Course in Woodbridge.

But “it’s not like there’s a big pot of money waiting in Richmond for roads,” he said, adding that the surplus does not solve the economic woes of the past few budget cycles. “We just completed a budget cycle that was tough. For the second year in a row, we had negative revenue … and that’s never before happened in Virginia.”

But signs are that the tightest of the times are nearing an end, he said.

Revenues from corporate income taxes and sales taxes are on a “slight uptick,” McDonnell said.

Meanwhile, the next budget does not include tax increases – and at the same time, uses figures showing revenue growth between 4 percent and 4.5 percent in the coming years, he said.

Cuts have made a difference, he said. Roughly $4 billion has been trimmed from the next two years’ expenditures, and some of those cutbacks have come from sacred areas -- education and health care, he said. The move was necessary, McDonnell continued, because the economy isn’t yet on solid ground.

“I’m optimistic,” he said, “but we still face really tough challenges in the new budget. We are a long way from being out from this tough economy.”

Some lingering signs, he said, of a weak economy: Virginia still has a large number of mortgages that are at risk of default. Credit is extremely tight and lenders are hesitant to extend lines. The state still faces unfunded mandates – pensions, especially. Housing starts are suffering.

“Whatever benefits we felt from the stimulus are over going into 2011, 2012,” McDonnell said, in reference to the $2.5 billion in federal Recovery Act dollars the commonwealth accepted.

Democrats in particular have pointed to this stimulus package as the cause of Virginia’s surplus, which rose in seven months time from a $1.8 billion deficit.

McDonnell did not directly address the stimulus fund Wednesday – and the question-answer period only allowed for two questions, about education and transportation – but he did speak at length about the pro-business atmosphere in the commonwealth and the state’s budget cuts as positive factors in Virginia’s economy.

The governor said he also hopes to make Virginia the “energy capital” on the East Coast by developing the area’s abundant sources – coal, natural gas and wind.

“Energy is emerging as a top issue for business and national security. We depend very heavily on other countries for oil … and they don’t always agree with us on issues,” McDonnell said. “The strategy on getting started [on new energy sources] is critical. Moving from innovation to commercially practical technologies is the challenge.”