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Let’s
give Gov. Mark Warner credit. In his October 15
televised address, he discharged his budget
responsibility forthrightly and on camera where
every Virginian could watch and listen.
Warner
could have simply sent a statement to the news
media. He could have agonized over his budget cuts
for weeks or months. He could have passed the buck
to the General Assembly by calling a special
session. But he did none of those things. That’s
the plus side.
On
the negative side, Warner shares blame along with
his predecessor, Gov. Jim Gilmore, and the General
Assembly for projecting revenues for the 2002-2004
biennium that were far too high. Admittedly, no one
could have foreseen with precision what the economy
would do after the General Assembly adjourned.
That’s the very reason why revenue projections
should have been more restrained.
With
all of Warner’s talk about structural budget
problems, it really comes down to how revenues are
forecast. Governors and the General Assembly’s
money committees seem averse to using forecasts that
assume any significant slowdown in economic
activity. It’s as if such an assumption would be
seen as a lack of confidence in the Virginia economy
and would somehow actually contribute to an economic
slowdown.
State
government can follow one of two courses. It can
continue to operate with overly optimistic
assumptions about the economy and respond to
periodic and inevitable slowdowns with either
painful budget cuts or tax increases. The other
course is to adopt more conservative economic
assumptions regardless of how extraordinarily well
the economy is performing at the time the budget is
finalized.
Warner
cut the budget this month because the economy
wasn’t performing as he and the General Assembly
had planned just months earlier. Whenever the
economy stalls, state revenue is likely to drop
below the amount needed to cover authorized state
spending.
The
Virginia Constitution and state statute require the
governor to reduce state spending whenever it
becomes apparent that state revenues won’t be
received as originally projected. That’s one
reason why Virginia continues to be among the best
managed states in the nation and blessed with a
triple-A credit rating.
It’s
better to avoid budget shortfalls altogether than to
be forced to make the kind of severe spending cuts
Warner announced last week. Even more painful cuts
must be made by the General Assembly early next year
unless the economy rebounds dramatically in the
meantime.
Much
of this unanticipated pain could have been averted
if our elected officials had resisted the urge to
spend every penny they thought the Commonwealth
might collect over the ensuing two years. It’s a
matter of discipline.
Unfortunately,
that kind of discipline isn’t likely to be
exercised without a constitutional amendment that
forces elected officials to project revenues more
cautiously. Without existing constitutional
restraints -- the governor and General assembly must
balance the state budget and go to voters for
approval of state-supported debt -- Virginia’s
financial position would surely be worse.
The
state budget will be balanced. The Constitution
leaves no other option. The question is whether the
structural budget problem will be dealt with so that
the commonwealth can avert similar crises in the
future.
There
is no better time than right now to begin the
process of amending the Constitution to mandate the
use of conservative revenue projections.
--
October
21,
2002
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