|
I have often said that a bad day on the Northern Neck is better than a good day in Richmond. Well, last Wednesday I was in Richmond for a budget briefing by Governor Kaine - and that certainly didn’t count for a good day in Richmond.
The Governor was just reporting on the revenue side of the equation, and Kaine painted a bleak fiscal landscape. There is now likely to be a $1.2 billion projected revenue shortfall in the fiscal year that began July 1, 2009 and ends June 30, 2010 (FY2010).
Coupled with a leftover shortfall from FY2009 of roughly $299 million, Kaine and the General Assembly must slash state spending by an additional $1.5 billion.
While we are early in the fiscal year, it appears the gap comes because income tax refunds are 30 percent higher than expected and sales tax revenue is 14 percent lower than expected, coupled with an annual growth rate of only 4.1 percent.
By far the most instructive chart in the Governor’s presentation is one that shows last year’s revenue collections versus previous years. Virginia had 15 percent less General Fund tax dollars collected in FY2009 than in FY2008. And, we collected even less FY2008 than in FY2007.
At the same time, our expenses are rising due to the “counter cyclical” nature of some demands for services.
The Governor touched on some good news, though – Virginia is in far better shape than many other states. We are one of a handful to have an AAA bond rating; we have again been named the best managed state to do business in; and, the Commonwealth hasn’t had to resort to any of the budget tricks or slight of hand that so many neighbors have. And we have not raised taxes on struggling families to balance the Commonwealth’s books.
There is some other good news. While state revenue lags other economic indicators, there are signs that the 21-month recession is nearing an end. Home sales have increased in the Commonwealth (albeit from bottom feeding), and there has been a drop in the unemployment rate from 7.3 to 6.9 percent.
So, where do we go from here?
Under the Virginia Constitution, the governor can cut up to 15 percent of the state's spending when the legislature is not in session. So, Governor Kaine requested revised budgets from all state agencies with proposed cuts of 5 percent, 10 percent and 15 percent. Once he reviews this information, he will announce the necessary additional spending cuts shortly after Labor Day.
And, in this next round of cuts, everything from schools to parks will be on the table.
For that announcement, I might just choose to stay in the Northern Neck – for any day in the Northern Neck will be better than that day in Richmond.
 |
