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Fact Check: Is Economic Fund a Cure-All?

If you listen to state Sen. R. Creigh Deeds (D) and ex-attorney general Robert F. McDonnell (R), a little-understood fund run by the governor's office is a quick ticket to economic prosperity in Virginia.

Both gubernatorial candidates have called for doubling the state appropriation for the Governor's Opportunity Fund to $20 million, and both say the potential for economic growth is big.

But Democrats also charge that McDonnell, as a House delegate from Virginia Beach earlier this decade, voted three times to cut the fund. And Republicans argue that Gov. Tim Kaine (D) isn't using the fund to its full potential, letting millions sit unused.

Neither claim is completely accurate.

The Governor's Opportunity Fund provides cash grants to companies that create jobs in Virginia. In localities with less than 100,000 residents, for example, a minimum private investment of $5 million and a promise of 50 jobs being created is required. Money is then provided by the fund to effectively seal the deal.

The program was started in 1992 by then-Gov. L. Douglas Wilder (D). Often, the funds are used when localities face serious competition for new businesses from other states or countries, said Christie Miller, a spokeswoman for the Virginia Economic Development Partnership, the state agency that administers the fund.

Among the $5.2 million provided this year: $1 million for Fairfax County to support Hilton Hotels Corporation's relocation from its old Beverly Hills, Calif., headquarters; portions of $6 million paid out to Prince ÖGeorge County, located just southeast of Richmond, for a new Rolls-Royce manufacturing plant; and $500,000 to Portsmouth to help bring in a facility built by Maersk, the world's largest container shipping company. About $13.6 million was paid out by the fund in 2008 and about $23 million was spent in 2007.

With the economy still a leading issue in the race, Deeds has made hay of McDonnell's House votes to "decimate that fund three times."

"He was against it before he was for it," Deeds told a Bedford crowd during a campaign stop earlier this month.

Indeed, McDonnell voted twice to cut money from the fund, and intended to vote for a third bill. He was one of 63 House members who voted for a 2002 bill to cut $8 million from the fund. A 2004 amendment that he voted for also eliminated $3 million of a proposed $5.5 million increase to the fund. He missed, but had planned to vote for, a separate bill on funding cuts for the program in 2004.

But McDonnell argues that "times have changed." Virginia's unemployment rate is nearly 7 percent; between 2002 and 2004, it fluctuated between 4 and 4.5 percent.

"We are facing the highest unemployment rate in a quarter century," he said in a statement. "In order to stay competitive, we must be forward thinking and look for better ways to attract new business and good-paying jobs."

And McDonnell says the fund is now being misused and needs new stewardship. The Governor's Opportunity Fund is budgeted at a level nearly 33 percent less than during the 2000-02 period, McDonnell's campaign notes.

About $5 million from the fund has been used this fiscal year, while $11 million has not been spent. Another $12.5 million was added on July 1 for the next fiscal year. Some $19.5 million in projects are in the pipeline, but have not been approved.

"That money has been allocated," said Gordon Hickey, a spokesman for Kaine. "It's hard to spend any more money when there's nothing left to spend."

Jared Leopold, a spokesman for the Deeds campaign, points to Deeds's steady support of the program dating to 1996.

"It doesn't make much sense to say Bob has always been for job creation in Virginia when he voted to cut this," Leopold said.

By Anne Bartlett  |  August 30, 2009; 9:00 AM ET
Categories:  2009 Governor's Race , 2009 Governor's Race Fact Checker , Creigh Deeds , Derek Kravitz , Election 2009 , Robert F. McDonnell  
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