For once I agree with John Chichester. (Scary, huh?) During a legislative retreat in Staunton yesterday, the Senate Finance chair warned that the state’s budget “will be hit hard’’ when there is a drop in national defense spending, which he anticipates in the next few years.
Reports Bob Stuart with the News Virginian: “Virginia is much more dependent than other states on federal spending,’’ Chichester said. “Homeland security and defense contracts have buoyed our growth.”
John Peterson, a professor of public policy and finance at George Mason University, drove home the message. “Defense spending is four and a half times more important in Virginia than in the United States,” he said, “and nine and a half times more important in Northern Virginia than in the United States.’’
While Virginia’s economy is strong now, Chichester called for continued fiscal discipline. The state senator cited the 1990s dot-com boom, which led to budget surpluses across America. “In Virginia, we enacted tax credits and other tax relief that totaled $1.5 billion a year,’’ he said. “And then we hit another recession.” The recession led to Virginia budget shortfalls and painful spending cuts.
We are well advanced in our current economic cycle. Another recession is more or less inevitable. The only question is the timing. Over and above that threat, with the Democrats running Congress, the spending bonanza for Northern Virginia’s defense/intelligence/homeland security sector is sure to end. I question whether spending will decline outright, but we can be certain that the rate of growth will slow.
I would be interested to hear Chichester’s take on Gov. Tim Kaine’s proposal to provide universal pre-school in Virginia, at a cost of some $300 million a year. Given his views on the coming slowdown in state revenues, will Chichester support a major expansion of a spending program? If not, Kaine has no prayer of triangulating past the House of Delegates.
One more note: Virginia is in much better shape now than in the 1990s. We’ve fully funded our rainy day fund, we’ve built a cushion of unused debt capacity, and we’re spending a significant percentage of the General Fund budget on one-time capital expenditures, not ongoing programs. While I still think we should roll back the 2004 tax increase, I will concede that the state has not spent the revenues recklessly. If we can simply restrain our appetites for more spending, we should stay in good shape.
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