How Much Have We Lost?

Tuesday, March 16, 2010

Harry Byrd Rolls Over

In the 1880's, Virginia had dug itself into a post-Civil War budget hole that took 40 years to fix, caused decades of political strife over debt, railroad stock, silver, and the "Commonwealth's Honor," and resulted in generations of Virginia children not receiving a public education and no infrastructure improvements. In the 1920's, Governor Harry F. Byrd, Sr. stepped into the breach and founded a prudent system based upon "pay-as-you-go," built schools and roads, and chiseled that the bedrock principle into our State Constitution to ensure we would never revert to the mistakes of the past. Many view our AAA bond rating as sacred.

Going into this budget cycle, we were faced with a $2.1 billion hole to plug after $7 billion of cuts already if we rejected Governor Kaine's proposal to eliminate car tax relief and increase the state income tax. The budget that the House & Senate just passed on Sunday night was "balanced" by using the following manuevers.
  • $620 million was "borrowed" from the Virginia Retirement System to be repaid with interest in the future and another $150 million +/- by "adjusting" actuarial formulas for retirement contributions for new state employees to reduce our contributions on the front end plus requiring new employees to pay 5% of their retirement (a 5% pay cut).
  • $360 million of federal Medicaid matching funds (new "stimulus" money) from the Federal Medicaid Assistance Program (FMAP).
  • $90-120 million of "fee" increases - many of which were rejected during the General Assembly session.
  • $3-10 million by not filling vacant judgeships or judgeships that will open up over the next two.

There are some problems with these methods. The Virginia Retirement System is not our Rainy Day Fund. I do not view "borrowing" monies allocated for retirement as balancing a budget. While it is not technically "debt" borrowed from a third party, it is borrowing from the future. It perverts our state's pay-as-you-go history.

The FMAP or stimulus monies have not been approved yet. They have been approved by Congress and the U.S. Senate but are in conference and President Obama has not signed the legislation authorizing the appropriation yet. Booking federal revenue based on the expectation that the United States Congress will do something is not prudent budgeting.

While there is no question that fee increases helped on the revenue side, Delegate Bob Marshall believes that many of these fee increases were illegal because many were rejected by the General Assembly during the session (e.g. these) and not approved in separate legislation. The last time Delegate Marshall challenged the constitutionality of a General Assembly budget maneuver, seven Supreme Court of Virginia Justices agreed with him. While Delegate Marshall has lots of views that I do not begin to ascribe to, every once in a while he is right.

Leaving judgeships vacant may seem harmless, but they have significant effects on people's lives. Each Fairfax County Circuit Court judge processes about 1,200 cases per year or about 3.2 per day. Every time one judgeship goes vacant, we save $250,000 per year, but trials get delayed. If delays become systemic which is inevitable with an entire judgeship vacant - criminals walk and people's lives get put on hold. We are going to have to (re)fund these judgeships in the future. The economic effects on the hundreds or thousands of people affected by delayed access to justice costs much more than $250,000 per year.

Virginia needs to also face up to the responsibility to maintain a sustainable Medicaid program, the federal-state program that provides health insurance to many aged, disabled and low-income people. The current federal healthcare proposal will require Virginia to expand eligibility and cover more currently uninsured people. If so, the legislature needs to determine how to pay for that and there is not enough money in the retirement system to "borrow" to cover that.

The reality is that Virginia's Budget suffers from significant structural deficits that we did not address this session. Our annual expenses exceed our annual revenue. The FY 2010-2012 hole was plugged with one-time fixes that papered over a problem instead of dealing with it. While I am glad that we fought and lessened the impact today, I am very worried about the future.

2 comments:

  1. The Republicans need to stop peddling this no-tax-increases snake oil. It's what got us into this hole, and doing the hard thing and raising taxes is the only thing that will get us out.

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  2. Scott,

    you and the "righteous 19" are the heroes of this legislative session.

    NAYS--Abbott, Armstrong, Bulova, Carr, Carrico, Ebbin, Englin, Herring, Hope, James, Johnson, Keam, Kory, Plum, Sickles, Surovell, Torian, Tyler, Ward--19.

    I'm appalled by the NOVA "Dems" who voted for/patroned HB1189

    Jersey started this under Christie Todd Whitman. classic misdirection play. i have other issues with her after her EPA Head lying about the toxic levels at ground zero, but that's another story. now their state funds are under-capitalized by $45 billion, and that dork Christie is still refusing to deal with commitments the state made. this is our path.

    the use of public servants to balance the budget and then be told "look at all the money you now have..." BY DEMS is a shame.

    and the other parts of VRS changes. reduced multipliers, total time (age+time on job) dramatically increased, employees paying an additional 5% for retirement (in PW this was done by the BOCS in lieu of a COLA)

    keep the faith brother. you are one of the truly righteous ones.

    bruce roemmelt

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