Mr. Speaker and Members of the House, in just over two weeks the Appropriations Committee will adopt its version of the Commonwealth’s budget for the upcoming biennium.

With the actions of the House Finance Committee this past Wednesday, many of you are wondering how the Appropriations Committee will be able to craft a budget.

On December 17th I announced that the Appropriations Committee would build a budget assuming that the Governor’s tax package would not be approved. To act otherwise would have been fiscally irresponsible.

With that as our first assumption, I, along with the subcommittee chairmen, began to chart a course of action whereby we would build a budget using the official “baseline” general fund revenue forecast of $26.1 billion.

The “baseline” forecast represents an increase of about $1.8 billion in additional general fund revenues for the 2004-06 biennium.

As we began to build our budget, we set forth several objectives that would serve as our compass in prioritizing spending. From the start, our first objective has been to preserve the state’s triple A bond rating. This is absolutely essential to the economic viability of Virginia. The first step in doing so is to keep the promise that I, along with the Governor and Senator Chichester, made to Moody’s in that we would replenish the “Rainy Day” fund.

Through our actions we will restore the $128.5 million to the Fund which had been slated for transfer to the general fund in the current fiscal year. Second, as required by the Constitution, we will make a deposit of $87.0 million in fiscal year 2006. Together, these actions will bring the balance in the Fund from $128.0 million to approximately $350.0 million.

As we build our budget and allocate over $1.8 billion in new revenue we will be guided by the following objectives:

1) We will fund the cost of re-benchmarking the current Standards of Quality as proposed by Governor Warner.

2) We will invest approximately $128 million in additional general fund support for higher education. These dollars will be targeted towards enrollment growth and to ensure more moderate tuition increases for in-state undergraduate students.

We will also provide funding for student financial assistance, including tuition assistance for undergraduate students enrolled in our private colleges.

3) We will provide funding for our mental health system, including full funding for the Olmstead initiatives.

4) We will protect the health care “safety net” for our children by providing funding to meet our projected enrollment demands in the FAMIS program. We will maintain our current eligibility and benefits structure in our Medicaid program and provide full funding for utilization and inflation for our hospitals and nursing homes.

I am sure that you all are wondering how we can build our budget within the revenues available. Clearly, the Committee’s flexibility to deal with competing budget issues rests on our ability to examine the budget and prioritize the Commonwealth’s obligations.

In order to fund our existing commitments, the House budget will not provide funding for program expansions or new initiatives. We have a responsibility to meet our existing needs in education and health care before we try to assume new obligations.

Second, to the degree possible, we will level fund or freeze programs at the FY 2004 level, unless the funding increase is necessary to meet enrollment and caseload increases.

Third, while transportation is vital to our long-term prosperity, I do not believe that we can burden the general fund with yet another obligation. Therefore, our budget will not include the transfer of the insurance premium tax. These revenues currently flow into the general fund and are used for education, public safety and health care. The debate over transportation funding should be centered around user fees and not on diverting general funds.

It is my hope that at the appropriate time this Session we can discuss new funding for transportation in order to build new roads and repair our bridges. However, I want to make it perfectly clear that any increase in fees for transportation will be used only for transportation and will not be used to balance the general fund budget.