Bacon's Rebellion

Democracy Thrives in Sunlight

A Budget Deal at Last

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by

James A. Bacon
in

Senate and House budget negotiators have finally completed a budget for the next two fiscal years. Although the $74 billion behemoth offers no broad tax relief and institutionalizes Virginia’s chronic budget surplus, it could be worse.

The best thing that can be said about the budget is that lawmakers resisted the temptation to use surplus revenues to ramp up expensive new spending programs. (There was loads of new money for old spending programs, but that’s a different issue.)

Instead of cranking up programmatic spending, the General Assembly devotes more than $1 billion to one-time capital outlays — without borrowing any money. That means if revenues fall short of projections in future years, Virginia can easily cut back direct outlays for capital improvements and make up the difference by tapping the bond markets. Combine that with a fully replenished “Rainy Day” fund, and the state budget should have lots of insulation from the next revenue shortfall. The bond-rating agencies should be very happy.

Even though there was no broad tax relief, the budget does offer the following targeted initiatives (to quote from Senate spokesman Scott Leake):

  • The repeal of the state estate tax, or so-called death tax takes effect July 1, 2007.
  • A back-to-school sales tax holiday will begin this August.
  • A tax credit for the payment of long-term care insurance premiums is established.
  • A tax credit for contributions designed to reduce tuition at schools for children with disabilities begins next year.

On the downside, legislators continue to throw money at K-12 education to meet the Standards of Quality standards without any regard to the efficacy of that spending. Medicaid spending is still out of control — tax breaks for long-term care insurance don’t address the real source of Medicaid budget inflation, which is payments for disabilities. And, of course, we still have the transportation issue to address, presumably later this summer.

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Comments

6 responses to “A Budget Deal at Last”

  1. Toomanytaxes Avatar
    Toomanytaxes

    Spending surplus revenues on one-time capital projects instead of adding to on-going commitments makes sense. Perhaps, some members of the GA actually learned something from the last budget fiasco.

    We need lobbying reform for the appropriations process. It’s too easy for people to request funding without being forced into the visible sunlight. The General Assembly should require that any request for funding, from any source, be reduced to writing and be posted on the Internet.

  2. James Atticus Bowden Avatar
    James Atticus Bowden

    So, the play ends as farce. Poor comedy from Republican senators is better than criminal incompetence.

  3. Anonymous Avatar
    Anonymous

    I guess I don’t get it. It is a bad thing to bury within the budget any form of tax legislation which increases a tax or fee. The House fought it out on that rhetorical line all spring. But now we hear it a good thing that legislation changing the taxation of estates and the credit for land conservation was approved along with the budget. How are those any different than the transportation revenue proposals? The House’s stand on principle was just hypocrisy.

  4. Toomanytaxes Avatar
    Toomanytaxes

    1:10 Again, why won’t the suppoerters of higher transportation taxes address the need for reforms first? Read the December 2005 state auditor’s report: VDOT has NO internal cost controls. If our transportation needs warrant tax increases, why is it acceptable for VDOT to waste money on projects?

    Second, we fund projects based on what can be lobbied through the CTB, rather than what actually improves traffic congestion on a cost-effective basis, as demonstrated by engineering and economic studies. Shouldn’t we eliminate the role of lobbyists in the funding of transportation projects before we ask citizens to pay higher taxes?

    Why are we spending billions to extend Metrorail to Dulles when the State’s own study demonstrates that extending Metrorail will not improve traffic congestion? Are we that flush? If so, why raise taxes?

    Why can’t Senator Chichester and his lackies answer these questions? Why can’t those who support tax increases answer these questions? The silence is telling!

  5. CG2 Avatar
    CG2

    It is interesting that those who decry using the budget as a vehicle for revenue bills (tax hikes and decreases) agreed to do just that by including in the budget at least two revenue bills that couldn’t pass the legislature as stand alone legislation (the Stosch tax credit for private schools and the estate tax bill). There are no principles at work here.

    Next, the Stosch tax credits for private schools for the disabled will be extended to other private schools and it will all be done in the budget (and in the conference committee) so the public won’t have a voice and those opposed are forced to an up or down vote on the whole budget including these little “gifts.”

    I do hope that the Governor has the line item veto pen ready.

  6. Scott Leake Avatar
    Scott Leake

    FYI – There will be a stand alone estate tax repeal bill introduced today (Mon.) and considered by the full Senate and House.

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