Shoot
'em and Bury 'em
Jerry
Kilgore and Paul Goldman have floated some bad ideas
regarding debt and taxes. Their proposals should be
quickly and expeditiously disposed of.
Two
proposals surfaced in recent days regarding state
and local finances. Both deserve a prompt burial.
The
first was offered by Attorney General Jerry Kilgore,
who suggested that the Commonwealth borrow $1
billion for the construction of local schools.
The
second proposal came from Democratic strategist Paul
Goldman, who urged Gov. Mark R. Warner to recommend
legislation allowing voters to decide whether state
taxes should be increased.
Kilgore’s
proposal is ill-conceived for at least three
reasons. First, the Commonwealth already has too
much debt. Second, borrowing distorts the process of
state budgeting. Third, abandoning a pay-as-you-go
method of financing school construction in favor of
borrowing inclines decision-makers to ignore
important questions, such as whether school
construction costs can be reduced.
Much
has been made on this page about the fact that
Virginians are awash in debt incurred by all levels
of government. Equally important, borrowing creates
an unhealthy rigidity in public finance.
Because
Virginia has experienced relatively sharp declines
in revenues once in every recent decade, we should
assume the pattern will continue. Our elected
officials should have more flexibility, not less, to
deal with these downturns.
On
top of the debt the already owed, the state just
recently committed itself to pay for construction of
almost $1 billion in college facilities by issuing
general obligation debt for that purpose. This ties
the hands of the governor and the General Assembly
for decades.
Kilgore
wants to put another $1 billion off limits for the
same period of time. Traditionally, one of the first
steps taken when budget gaps occurred was to defer
spending on capital projects until the revenue
situation improved. That can’t happen when those
projects are debt-financed. This means that other
programs must bear disproportionate cuts.
A
pay-as-you-go approach is preferable. Whether we
borrow or pay for the program out of state revenues
in two-year increments, we would need to find
additional state revenues. Borrowing simply
postpones that day of reckoning. It isn’t a source
of new revenue.
Debt
financing seems relatively painless. The benefit is
front-loaded, while the burden is postponed. This
undermines fiscal discipline.
Before
we shift much of the responsibility from localities
to the state for funding school construction, we
should be looking more carefully at its cost. We
need to find ways to build schools for less even if
it means taking on the U.S. government. New
schools simply cost too much to build, principally
because federal regulations impose unnecessary
design requirements. Private schools and other
government buildings are required to meet the
requirements of the statewide building code, but not
excessive supplemental requirements imposed by the
feds.
Neither
Kilgore nor Goldman suggests controlling state
spending, which is growing at about 8 percent per
year.
Must
the answer always be more state funding?
Turning
to Goldman’s idea of holding a statewide
referendum on whether to raise taxes, there is one
obvious objection. It offends the Virginia
Constitution.
The
Constitution provides that all legislative power is
vested in the General Assembly. The Virginia Supreme
Court has ruled that the power to levy taxes, one of
the most important of legislative powers, can’t be
delegated — even to the electorate itself. If new
taxes are to be imposed, members of the General
Assembly must vote on the question. Any tax law must
be signed by the governor before it can take effect,
as is true for every state law.
Let’s
start shoveling dirt on both of these proposals.
--
December 1, 2003
|