Virginia’s Preliminary $936 Million Surplus Leaves Budget Questions Unsettled

Virginia ended fiscal year 2026 with a preliminary $936.3 million general fund surplus, giving the state a stronger budget position than lawmakers expected but not a final amount available for new spending.

Revenue collections were $936.3 million, or 2.9%, above the Chapter 7 forecast, according to a July 13 memorandum from Secretary of Finance Mark Sickles. The governor’s office said July 14 that the recently adopted 2026–28 budget incorporates $585.5 million of the preliminary surplus into fiscal 2027 starting balances.

The figures are based on preliminary accounting and remain subject to final adjustments at the month-end close. The next major checkpoint is the expected public release of final revenue figures at the August meeting of the Joint Money Committee.

Revenue beat the forecast by 2.9%

Virginia’s general fund revenues grew by $2.09 billion, or 6.7%, compared with fiscal 2025. The Chapter 7 budget forecast had assumed 3.7% growth, producing the $936.3 million difference.

The surplus does not mean Virginia has an equal amount of uncommitted money. Some of the additional revenue has already been reflected in the enacted 2026 Appropriation Act, which provides appropriations for the two fiscal years ending June 30, 2027, and June 30, 2028.

Where the surplus came from

The finance memorandum identified several major differences between collections and the state’s forecast:

Payroll withholding was $183.4 million above forecast.
Nonwithholding revenue was $347 million above forecast.
Refunds were $286 million below forecast.

Payroll withholding, nonwithholding receipts and lower refunds accounted for about two-thirds of the surplus, state officials said. The governor’s announcement also cited strong individual income-tax and sales-tax receipts.

Those sources can change quickly. The finance memorandum said nonwithholding revenue is closely correlated with equity prices and is therefore inherently unpredictable. The category can vary with investment income, business conditions and taxpayer behavior.

How the enacted budget treats the money

The governor’s office said $585.5 million of the preliminary surplus was incorporated into fiscal 2027 starting balances. The enacted budget lists a fiscal 2027 unreserved beginning balance of $2,316,398,593 and $594,402,250 in first-year additions to balance.

Those figures should not be treated as identical. The governor’s announcement describes the portion of the preliminary surplus incorporated into fiscal 2027 starting balances, while the Appropriation Act presents the full budget-resource calculation used for the first year of the biennium. The act lists the beginning balance, additions to balance, official revenue estimates and transfers as separate components of total general fund resources.

For fiscal 2027, the act lists $38,719,516,637 in total general fund resources available for appropriation. That total includes the unreserved beginning balance, additions to balance, official revenue estimates and transfers. It does not automatically direct the entire preliminary surplus to new programs, tax rebates or payments to residents.

Why officials are urging caution

Finance officials said the state took a cautious approach because much of the surplus came from volatile revenue streams. That caution matters when lawmakers consider whether money can support recurring obligations such as ongoing program expansions, permanent staffing or continuing tax changes.

The state also reported approximately 50,000 net job losses during fiscal 2026, even though the remaining jobs posted above-average wage growth. The memorandum described the resulting economic picture as mixed: stronger income from some workers, but fewer jobs overall.

Officials characterized the volatility as a budget risk, not as a prediction of an imminent shortfall. A strong year can improve the state’s short-term flexibility without guaranteeing that the same revenue will recur in future years.

What Virginia residents should watch next

For residents, the surplus affects the state’s capacity to make future spending decisions. It does not by itself create a refund, reduce taxes, expand eligibility for services or change school, health or public-safety funding.

Those effects would require separate action through budget amendments, supplemental appropriations, reserve deposits or other enacted provisions. The current budget sets appropriations for the 2026–28 biennium, while later adjustments would proceed through the state’s normal budget process.

The next important question is how much of the $936.3 million survives final accounting. The state said a complete accounting of final revenue sources would be released publicly at the August Joint Money Committee meeting. That accounting will show whether the preliminary gain changes the amount available for future decisions and how much should be treated as one-time or volatile revenue rather than a dependable base for ongoing spending.

Sources

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