Question

Where does Richmond, Virginia receive their revenue? What is their top source?

Answer 1

State government resources can be grouped into several categories: taxes, grants, fees, sales, earnings, transfers, and balances. For the 2008-2010 biennium, total state resources available for appropriation are projected to equal $81.6 billion, including year-end balances, transfers, and bond proceeds.

Total revenues from all tax sources are projected to be $35.7 billion. Tax revenues include $19.7 billion from individual income taxes and $4.3 billion from motor vehicle and highway taxes. Other large revenue sources for the biennium include $18.0 billion in federal grants and $10.0 billion in institutional revenue, primarily fees collected at colleges and universities, medical and mental hospitals, and correctional facilities.

For budgeting purposes, state revenues are divided into two broad types: (1) the general fund and (2) non-general funds.

More than half of state revenues (58.7 percent) are "non-general funds," or receipts set aside for specific purposes. For example, motor vehicle and gasoline taxes are earmarked by law for transportation programs, student tuition and fees must support higher education, and federal grants are designated for specific activities.

General fund revenues make up 41.3 percent of the budget. They are mostly derived from direct general taxes paid by citizens and businesses in Virginia. Because general fund revenue can be used for a variety of government programs, these are the funds that the Governor and the General Assembly have the most discretion to spend.

General fund revenues

General fund revenues for the 2008-2010 biennium total $29.9 billion, not including balances and transfers. The general fund is derived primarily from three major revenue sources:

• Individual income taxes ($19.7 billion): Taxes paid by individual citizens on their income;
• Corporate income taxes ($1.4 billion): Taxes paid by businesses and corporations on their income; and
• Sales and use taxes ($6.1 billion): Taxes paid by citizens and business on goods they buy.

Other revenue sources for the general fund include $540.6 million from insurance premium taxes (taxes paid by insurance companies on premiums), $596.2 million from wills, suits, deeds and contract fees (primarily from the recordation tax on mortgages), $186.7 million from public service gross receipts taxes (taxes paid by public utility companies), and $1,301.1 million in other miscellaneous taxes.

Finally, the Commonwealth expects to transfer $848.5 million to the General Fund for ABC profits and other miscellaneous transfers.

Non-general fund revenues

Although most public attention is focused on general fund revenue, the majority of revenue in the state budget is "non-general funds." These funds are earmarked by law for specific purposes. For the biennium, non-general fund revenues total $42.5 billion, not including balances and bond proceeds.

Federal grants are the largest source of non-general fund revenue ($18.0 billion for the biennium). Frequently these grants do not come to the state as simple cash transfers. The federal government mandates many program requirements as conditions of the grants and often states must provide matching funds. Entitlement programs such as Medicaid and Aid to Families with Dependent Children are examples of programs that require a state contribution.

The second largest source of non-general fund revenue is institutional revenue ($10.0 billion for the biennium). The principle sources of this revenue are patient fees at teaching hospitals and mental health institutions as well as tuition and fees paid by students at institutions of higher education.

State transportation revenue comes from several sources including the motor vehicle fuels tax, the motor vehicle sales and use tax, road taxes, vehicle license fees, state sales tax, interest earnings, and other miscellaneous taxes and fees. Money in this fund is used to support highway construction and maintenance and operating costs. Federal, local, and toll revenues are also used to finance transportation programs. For the biennium, transportation revenues are anticipated to be $4.2 billion.

Another non-general fund is the Unemployment Insurance Fund ($809.1 million). Insurance tax collections rise and fall with the level of unemployment. Corporate downsizing and restructuring have increased unemployment tax collections in recent years.

Other non-general fund revenue sources include fees paid by citizens and businesses for licenses ($1,401.6 million), profits on sales of alcoholic beverages ($1,150.6 million), sales of lottery tickets, sale of state property ($1,337.1 million), and earnings on state funds ($198.1 million).