updated 11/12/2010 3:06:55 PM ET 2010-11-12T20:06:55

Virginia general fund tax collections increased in October by a modest 3.7 percent, the first time in three years that revenues have grown three months in a row.

The slow upturn after two consecutive years of overall revenue losses was reflected Friday in the monthly summary of state finances for Gov. Bob McDonnell.

The figures offer hopeful signs. October's growth is largely the result of increases in two major taxes tied to jobs and consumer confidence.

McDonnell and his predecessor, former Gov. Timothy M. Kaine, along with the General Assembly cut billions in state spending over the past three years because of the worst economic downturn since the Great Depression.

At one point, the general fund endured month-over-month revenue declines for 16 months in a row, from August 2008 through November 2009, according to an Associated Press database of historical budget records.

State income taxes withheld from paychecks, which account for nearly two-thirds of all general fund collections, was up 4 percent in October, from $740 million last year to $770 million last month. It's the first time the state has seen income tax withholding grow for six consecutive months since April 2008.

Sales tax collections, based on September retailing, increased by 6.5 percent, from $238 million last September to about $253 million. Sales tax receipts lag because merchants remit the taxes they collect at the end of each month.

Collections of the tax paid to record real estate deeds, wills, contracts and lawsuits also increased for a third straight month, a glimmer of hope for a weak real estate market. October's recordation tax receipts were up by 2 percent over the same month a year ago.

Four months into the 2011 fiscal year, however, year-to-date general fund collections remain 0.4 percent behind their mark at the same point last year.

The general fund pays for such core state services as health care, public schools and public safety. To provide the money to be appropriated in the state budget, Virginia needs to take in more than $14.5 billion, or 2.6 percent more the $14.2 billion collected in the fiscal year that ended on June 30.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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