By Seth McLaughlin

State employees welcomed Gov. Robert F. McDonnell announcement last week that Virginia could end the budget year with a $140 million “surplus” – putting them a step closer to one-time bonus checks. 

But others inside and outside of the state budget-making process question whether McDonnell is wrong to describe the incoming revenue as a “surplus" – especially during a fiscal year in which the state is putting off $137 million in contributions to the Virginia Retirement System, which covers 600,000 teachers, state employees and other beneficiaries.

“It’s not a surplus,” said Senate Finance Chairman Richard L. Saslaw, D-Fairfax. “There is no question we got to where we did by borrowing from VRS and that means repaying it as soon as possible.”

Mark Rozell, a professor of public policy at George Mason University, said that it is “technically correct, but misleading nonetheless” for the governor's office to characterize the additional dollars coming in at the end of the year as a surplus.

“Anyone who works in the state public sector understands and has experienced that there is a real budget shortfall in Virginia,” Rozell said. “So, although its politically beneficial for the governor to mention that the budget carries an actual surplus, it doesn’t tell the real story of the fiscal situation in state government.”

In March, the General Assembly adopted a “caboose” bill that – like those before it – aimed to tie up the loose ends in the biennial budget that runs through June 30. 

The bill included an updated and conservative, revenue forecast for the fiscal year. It also deferred the fourth quarter payments to VRS and a 3 percent bonus for state employees that was contingent on a $83 million “surplus” being available when the books closed at the end of this month.  

The moves helped lead to the governor's announcement last week that incoming revenues would likely exceed the revised budget forecast by roughly $140 million, increasing the likelihood that state workers would get their long-awaited bonus.

Asked whether the unexpected revenue should be considered a "surplus" after the state delayed payments to VRS, Virginia Secretary of Finance Richard D. Brown said, “Sunday morning quarterbacking is easy in this game.”

“When that decision was made to defer that [VRS] payment you didn’t know that you had a surplus,” Brown said. 

R. Ron Jordan, executive director of the Virginia Governmental Employees Association, which represents roughly 20,000 people, is not complaining. Jordan said he was confident lawmakers would pay back the money it borrowed from VRS and that the governor would be smart to use the surplus for state employee bonus checks because they have not received a salary bump in four years.

Others are not as optimistic.

Eileen Norcross, a senior research at fellow the free-market oriented Mercatus Center at George Mason University, said that Virginia like many states is deferring payments to balance its budget and to calculate “the idea that they have a surplus.” 

“They are finding revenues in other places, trying to replace the fact that it is not coming in through tax revenues,” Norcroft said. “In that sense, it is sort of like a shell game where they are moving money about … They want to portray this in a positive light and it ‘s inaccurate. It gives you a false sense of stability of fiscal health.”

Stephen J. Farnsworth, a politcial analsyst from George Mason University, had a different take. 

“This is something that routinely happens in Virginia politics," he said. "The state has to balance its budget every year, but it is not uncommon to delay bills or to push things from one fiscal year into the other to make things look good for the politicians. It is not a new trick.”