Does a $641 million revenue shortfall in the state budget justify tapping the state’s Rainy Day Fund?
Gov. Timothy M. Kaine thinks it does. He is willing to lay off 74 state workers and reduce the state workforce by another 386 jobs through attrition, saving some $39 million. He’s ordered agency spending cuts of $54 million, instituted operating efficiencies expected to yield another $92 million, and cut programmatic costs. He’s even willing to return five percent of his annual salary. That amounts to about $300 million. But that’s all he’s willing to cut.
Says Kaine in a press release: “The Revenue Stabilization Fund was created for just this type of budget situation—a sudden, unexpected change in economic conditions after a budget has been adopted by the General Assembly. The Fund has specific triggers that have to be met before it can be used, and those triggers have been met this year.”
The House of Delegates leadership says, “No way, Jose.” (Well, that’s what GOP legislators would say if they weren’t so worried about illegal immigrants!)
House Speaker William J. Howell, R-Stafford, and Vincent F. Callahan, R-Fairfax, make their case this way:
The Commonwealth is not in a recession and our economy continues to grow, albeit at a slower rate. Unlike the recession earlier this decade, when the state actually collected less revenue, the most recent updated revenue forecast presented by Secretary Wagner in August indicates Virginia’s revenues will grow 3 percent in the current fiscal year (FY 2008). Through August, growth stands at 3.4 percent.
Many lawmakers believe it is ill-advised to consider using the Rainy Day Fund under these circumstances. If we begin the practice of using the state’s Rainy Day Fund during a non-recessionary period, we run the risk of establishing a precedent that suggests that the Commonwealth can overspend taxpayer resources without consequence.
I agree with Howell and Callahan: The circumstances don’t warrant dipping into the kitty. However, they don’t specify where spending should be cut. Might I make a humble suggestion? Kaine has covered nearly half the shortfall through cuts in the operating budget. Cover the rest through reductions in capital spending. If I recall correctly, the legislature had loaded up the current budget with $1 billion on more in funding for roads, water treatment plants and other capital improvements. Roads in particular were to be funded with surplus funds. If the surplus evaporates, then so should the road spending. Sounds like a no-brainer to me.