Thursday, March 1, 2012

Richmond Stuck On a Bad Budget

The press has started to heat up over the budget situation.  I was one of twenty-one delegates to vote "no" on the House Budget (HB30).  It has now been rejected by the State Senate.  Here are some of the reasons why I voted "no."

Earlier this week, I appeared at a press conference with my colleagues Delegate Patrick Hope and Senator Adam Ebbin in our press conference to discuss the problems with the current budget.  You can view our Press Release here and watch video of the press conference here:
  • The Governor's and House Budget's transportation funding proposal in the budget is a gimmick.
  • Our secondary education spending levels are still 10% below their peak in FY 2009.
  • The proposed budget is laden with bad choices and special interest pork.
  • The budget does not reflect the priorities of my district of the Commonwealth of Virginia given our current budget environment.
Transportation Gimmickry

The Governor has proposed to divert 0.25% of the sales tax from schools, public safety, healthcare and the safety net to roads on an annual basis.  This starts off at $50 million per year and grows to $300 million per year over six years.

In March, 2010, the Department of Transportation estimated our annual transportation spending shortfall to be at least $3.1 billion to $4.4 billion per year.  This proposal funds less than 2% of that need in Year 1 and 7-10% of it is in Year 6.  In the meantime, it defunds programs in ways that is damaging. 

This is exactly the same kind of gimmickry I decried in our last session when I presented a cake to the General Assembly (watch the video here).  We deserve a real transportation funding discussion, not a gimmick.  I am concerned that these continued baby steps distract from the need for a discussion about a meaningful compehensive discussion.

Refusing to Repair to Education
The House Budget does real damage to public education:
  • Virginia's teacher salaries have gone from being $3,000 under the national average in 2001-2002 to $7,000 under the national average today.
  • Per pupil funding has gone from $5,200/child in FY09 to $4,750 under the proposed House Budget.
  • Virginia's class sizes have gone from 3rd in the United States in 2005-2006 to 42nd in 2009-2010.
  • While other states have hired more teachers, we have lost 16.7% of our teachers in the last ten years.
Today, we are trying to educate 31,000 MORE children with LESS money.  This does not work.  Instead of cutting education even more, we should be trying to repair the damage. 

The proposed budget does not begin to repair any of this damage.  We are not even funding the state's share of the budget consistent with inflation. 

Pork Over Priorities
The current budget is laden with pork and tax preferences that should be cut before we continue to cut schools, public safety and health care.
  • $196 Million - Combined Reporting Loophole - Virginia allows corporations to park income from their corporate subsidiaries in other states with lower income tax rates and pay taxes in those states.  If Virginia made its corporations pay Virginia income taxes, we would collection approximately $100 million more per year.
  • $110 Million - General Fund Road Transfer - The Governor should not be diverting $110 million over two years from the General Fund to roads - roads deserves a real conversation (above).
  • $50 Million - Private School Tax Credit - The House & Senate have approved $50 million of new tax credits for private schools just this year.
  • $50 Million - Governor's "FACT" Fund - The Governor asked us to create a special fund for him to help spend money to make up for federal defense cuts - cuts that are not going to happen for another five years. 
  • $40 Million - Coal Tax Credits - Virginia has a tax credit for coal jobs that costs taxpayers $40 million every two years.  Coal has been around for over a century.  It should be able to make it on its own and we should be subsidizing new industries such as solar and wind, not old ones.
  • $22 Million - Oil & Gas Tax Loophole - Virginia has a sale tax exemption for the purchase of equipment relating to natural gas fracturing or "fracking."  It was created in 1994 and sunsets in 2016.  It's time to sunset it now. 
  • $20 Million - Domestic Production Loophole - When the recession hit in 2007, the federal government allowed companies to claim an additional tax exemption on an amount of profit relating to certain industries (good production, film production, software, etc.) - in other words they didn't need to pay taxes on the first 10% of profits.  Virginia began scaling this back in 2010-2011, but the House Budget refused to scale it back further in this budget. 
  • $8 Million - Speilberg Tax Credit -  Virginia created a $4 million annual tax credit for movie production in Virginia.  Last year, Virginia gave billionairre Steven Speilberg over $5 million of tax credits and in-kinds to produce a movie in Richmond.  I don't think he needed the money and this isn't a priority when we are continuing to cut education.
  • $8 MillionHotel Tax Loophole - Virginia allows online companies such as Expedia and Orbitz to purchase hotel rooms at the wholesale rate and resell at retail price while paying taxes at the wholesale price and charging consumers taxes at the retail price and pocketing the difference. 
  • $4 Million - Yacht Tax Loophole - Virginia has as $2,000 cap on taxes on the purchases of boats.  If you're gonna buy a yacht, buy it in Virginia.
  • $?? Million - Re-Election Earmarks - The House Budget contains at least $5 million of spending for freshman caucus members to help boost their re-election prospects.
These total $480 million over the biennium.  Given our budget environment, I do not believe that the items listed above should be more important than teachers, health care, higher education, or public safety.

Wrong Priorities
If we were to take $480 million over this year and invest it back into the Commonwealth it could invest in one of the following (or some lesser combination):
  • 4,579 Teachers
  • 3,818 Police Officers
  • 4,113 Fire Fighters
  • 10,272 Home Healthcare Workers
  • 51,099 Children in Pre-K
  • 181,439 Children in FAMIS
  • 4,700 Elderly not kicked out of nursing homes due to reduced Medicaid eligibility because of cuts.
If we were to take that money and invest it entirely in secondary education and distribute it consistent with the existing distribution ratios this would mean the following for Fairfax County:
  • Approximately $45 Million
  • 416 New Teachers
  • $151 more state investment per child
The passed budget does not fully fund cuts to Northern Virginia's "Cost to Compete" funding introduced to keep our salaries competitive in Northern Virginia over 10 years ago.  It does nothing to reduce the 11,000-child childcare subsidy waiting list.  We are funding a minimal amount of Medicaid waivers for the severely disabled. 

These are the choices the House Budget makes.  I do not view these choices as the right ones for my district.  I am proud to vote no and will continue to fight for the right priorities for my constituents and the Commonwealth. 


  1. Scott, I support your efforts to close loopholes. I am not opposed to my property taxes increasing if it goes towards improving the quality of public education children receive, but I'm absolutely opposed to any property tax increase going towards tax credits and loopholes like yachts or private schools. However, I would like to see an evaluation of the coal and natural gas credits to determine how much energy prices will increase if these credits are cut. Point being, if consumer prices will increase dramatically and lower income families will suffer, it may be worthwhile to keep the credit. Also, while a movie credit seems silly, movies can generate much income for local economies, so I'd be interested in seeing a cost/benefits analysis of the movie tax credit if there's one out there.

  2. CB

    Thanks for your comment.

    Many of our tax credits were studied by JLARC last year (the General Assembly's non-partisan budget auditing branch).

    It specifically found that the Coal Production Tax Credit was ineffective and no accomplishing the objectives it was intended to cover. You can read the report here:

    The Movie Production Tax Credit is debatable. The Governor believes it has a net positive effect, but it's very hard to measure. Many studies have questioned the utility of these programs in other states: