RICHMOND, Va. (AP) — Gov. Bob McDonnell said the state government ended the latest fiscal year in June with an unspent balance of $448 million, but more than 90 percent of it is already obligated by state law, including a 3 percent pay bonus for state employees.

McDonnell told the General Assembly's budget-writing committees on Wednesday that total savings from government operations for the past 12 months include $187 million from state agencies and $132 million recouped from higher education and other sources.

Those funds, along with a revenue surplus of $129 million announced in July, gives the state enough to provide a one-time 3 percent bonus in December to employees with solid job-appraisal records — about a week-and-a-half's additional pay before taxes.

It marks the third year in a row that Virginia has ended a budget cycle with more revenue and savings on hand than was required to meet budgeted expenditures.

Most of the "surplus" is already spoken for.

The first year-end bonus that state workers have had since 2010 will account for $77.2 million of the surplus.

"After five years with no pay raise, I am pleased we are able to reward our employees with this performance incentive bonus," McDonnell said.

Actually, most state employees got a 5 percent raise starting July 1, but all of it goes directly to paying the worker's share of increased contributions to the state's public employee pension system, which has unfunded liabilities of almost $24 billion and is bracing for an oncoming wave of baby-boom retirees.

Virginia's "rainy day" reserve fund gets $78 million, bringing its balance to $689 million, more than halfway back to where it stood before it was depleted to help the state cope with billions in shortfalls from the 2008 recession.

The Water Quality Improvement Fund gets $17 million. A new Federal Action Reserve Trust fund that McDonnell created this year to help the state cope with expected federal spending cuts as Congress copes with billions in deficits and trillions of dollars in debt gets $30 million. Nearly $21 million goes to the Transportation Trust Fund. And $17 million will offset state relief costs from natural disasters in the past year, including an earthquake nearly a year ago centered in Louisa and Hurricane Irene.

State colleges and universities collectively mustered about $66 million in both general fund support from the state non-general money from business operations that the state is holding momentarily before reallocating it back to those schools. Another $66 million in non-general money other state agencies collected also returns to its sources.

When all the claims on the year-end balance are satisfied, it leaves only $41 million as an unencumbered surplus that McDonnell and the legislature may spend as they wish.

"After all of the things that the law already designates on where that money goes, $41 million is the remnant of the discretionary general fund surplus that now is up to me to make a recommendation to the General Assembly in December as to where that might go," McDonnell told reporters after his address.

McDonnell, a key ally and favored proxy of Republican presidential nominee-in-waiting Mitt Romney, used part of his budget address to assail Washington — both President Barack Obama's Democratic White House and Congress — over the inability to agree on deficit-reduction strategies necessary to head off automatic and indiscriminate federal spending cuts scheduled for Jan. 1. The reductions, known as "sequestration," would eliminate more than 200,000 jobs in Virginia, a Washington, D.C., next-door neighbor profoundly affected by federal payrolls, contracting and military outlays.

"I don't think we can afford this policy. I think we should fight the sequestration as the way to reduce the national debt. We're embarking on a course without precedent in the post-World War II era," McDonnell said. "Here in Virginia, the force reductions would be a double blow."

Legislative Democrats acknowledged that revenues in Virginia had fared better than in many states, and that stingy budgeting is partly responsible for ending fiscal year 2012 in the black. But they claimed McDonnell used fiscal gimmickry to inflate the surplus.

"In the biennium we just finished, ... yeah we had a surplus but we didn't pay $500 (million) to $600 million into the VRS," Senate Democratic Leader Richard L. Saslaw of Fairfax said. He was referring to the GOP-led budget-balancing tactic in 2011 that deferred payments into the Virginia Retirement System and applied the $620 million to state government operations. "Well, if you don't pay your bills, hell yeah, you can have a surplus."

He said McDonnell enhanced the total in part by counting $132 million in pass-through cash — half of it from higher education — and noted cuts to state support for public kindergartens through high schools.

"You're telling them, 'Don't spend the money, and I'll give you a 3 percent bonus, and then whatever money's left over, you'll get back.' That's not a surplus!" Saslaw said.

McDonnell bristled at hearing the returned money characterized as fiscal sleight-of-hand.

"We didn't spend it. If you didn't spend it at the end of the year, it's a savings," McDonnell said.