RICHMOND, Va. (AP)- Gov. Ralph Northam has told state lawmakers that Virginia is starting the new budget cycle “in a good place.”

In a speech to the General Assembly’s money committees Tuesday, Northam said the state ended the fiscal year with a surplus of $797 million. Much of that money is already earmarked for water quality and taxpayer relief.

Northam said the state put $344.4 million into reserves, bringing the total reserve fund to $1.6 billion by 2021, the highest amount ever.

The governor warned lawmakers that despite the state’s strong financial position now, it doesn’t mean they will have a large surplus to spend in the budget he will propose in December. He said the state must be “both cautious and strategic.”