The House Appropriations Committee appropriates deposits into the state’s Revenue Stabilization Fund (often referred to as the Rainy Day Fund) and the Revenue Reserve Fund.
Budget Overview
Conditions outlined in the Constitution and Code of Virginia require mandatory deposits to the Revenue Stabilization Fund (Rainy Day Fund). The Constitution requires a deposit into the Revenue Stabilization Fund if growth in sales, corporate, and income tax collections exceed the prior 6-year average combined growth rate. The Code of Virginia allows for additional deposits into this fund if the combined growth in sales, individual, and corporate taxes is at least 8% and at least 1.5 times the prior six-year average combined growth rate. Revenue calculations for mandatory deposits to the Rainy Day Fund exclude tax policy changes.
The Code of Virginia sets out the parameters for depositing resources into the Revenue Stabilization Fund. When a general fund surplus exists and a Rainy-Day Fund deposit is not required, then the General Assembly must make a deposit of the surplus less required deposits to the Water Quality Improvement Fund or 1% of general fund revenues collected.
Virginia has strengthened its reserves significantly since 2018 with only $440 million in reserves at that time. At the close of FY 2025, Virginia had $4.5 billion in combined reserves.
The Rainy-Day Fund and Revenue Reserve Fund cannot exceed 15% of total average revenues collected from – sales, income, and corporate taxes in the 3 preceding fiscal years. When the revenue calculation is below 6%, then the combined cap is extended to 20%. When this happens, the excess revenues must be withdrawn and deposited to the general fund.
| $ in millions | Deposits into the Revenue Stabilization Fund | Deposits into the Revenue Reserve Fund | Withdrawals from the Revenue Reserve Due to Cap |
|---|---|---|---|
| FY 2020 | $262.9 | $0.0 | $0.0 |
| FY 2021 | 77.4 | 339.0 | – |
| FY 2022 | – | 1,148.7 | – |
| FY 2023 | 1,127.7 | – | – |
| FY 2024 | 904.7 | – | (498.7) |
| FY 2025 | – | – | (332.3) |
| FY 2026 | – | – | (675.7) |
The Revenue Stabilization Fund is in Virginia’s Constitution and there are restrictions that are not easily amended that govern withdrawals from the fund. A withdrawal from the Rainy Day fund can only occur if an adopted general fund forecast declines by 2 percent or more in a revised fiscal year forecast. This means that Rainy Day funds are not readily available in any year when the state is working on a new biennial budget. The rules for withdrawing funds from the Revenue Reserve Fund are more flexible, since the provisions are outlined in the Code of Virginia. Currently, Revenue Reserve funds can be used to address revenue shortfalls of less than 2%.
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