Virginia Priorities in an Economic Crisis
Kenneth R. "Ken" Plum
 
        Governor Kaine announced last week that "just like families and businesses, state government is feeling the effects of the national economic crisis."  In the current biennial budget the revenue shortfall already exceeds $2.5 billion.  "And just like Virginia families and businesses," the Governor said, "we're going to have to reduce our spending to make ends meet."
 
        To balance the current year budget the Governor announced the layoff of 570 employees and the elimination of 800 additional positions that are currently unfilled, delay of state employee 2% pay raise, bonding nearly $250 million in capital outlay that had been planned for cash payments, withdrawal of about $400 million from the Revenue Stabilization or rainy-day fund, and many smaller reductions throughout state government.  The Governor proposed no reductions in K-12 education as the school year is already underway.  The continuing, evolving financial crisis makes it clear that even more reductions will be needed.  Unlike the federal budget, the state budget must be balanced.
 
        Some of the Governor's actions will require General Assembly confirmation when it meets in January.  While use of rainy-day funds will be controversial, rejection of the Governor's plan would mean that $400 million or more of additional cuts would need to be identified.  A recent opinion column by Speaker of the House William J. Howell (The Washington Post, October 5, 2008) offered some insight into the way the Speaker as leader of the Republican majority in the House of Delegates viewed the financial crisis and the budget shortfall.  He expressed "hope that the Governor's spending reduction proposals will be based on common sense and fiscal restraint."
 
        The Speaker made clear his priorities.  "But Virginia's budget cannot remain on its current trajectory, with 54 percent of expenditures going to just three areas - education, health care and child welfare - that are growing at an unsustainable rate of nearly two percent faster than long-term general fund growth," he wrote.  His column did not mention that even with recent increases in public education funding the state continues to underfund its share of public school costs leaving the difference to be made up by local property taxpayers.  If his reference to health care means Medicaid, Virginia continues to have the least funded and stingiest system in the country.  The reference to "child welfare" may mean preschool education and/or children's health insurance, both of which are minimally funded by any national standards.
 
        The debate on balancing the budget will not be simply making expenses and revenue equal.  It will be about the priorities of government.  I happen to believe that education, health care and child welfare should be among our priorities.  I believe the Governor's proposals represent common sense and fiscal restraint.