Bacon's Rebellion

Democracy Thrives in Sunlight

Hell Freezes Over: Chichester Gets It Right

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by

James A. Bacon
in

I haven’t agreed with much that Sen. John H. Chichester has said over the years, but I do find him making sense as he nears the end of his nearly 40-year tenure in the General Assembly.

First, reports Chelyen Davis with the Free Lance-Star, Chichester warned Gov. Timothy M. Kaine not to address a projected $641 revenue shortfall by raiding the Rainy Day Fund, which is set aside for fiscal emergencies.

Secondly, he says that the state should instead take back some of the roughly $500 million in General Assembly cash allocated to transportation projects. That makes total sense. The justification for using General Fund money to pay for transportation projects was the fact that it was surplus (not needed to fund ongoing programs). Even Homer Simpson could figure this out: If the surplus isn’t materializing as projected, don’t cut other programs — cut back the funding for transportation!

Gov. Kaine and the General Assembly took a risk when they agreed to fund transportation with surplus revenues. Things didn’t turn out like they hoped. Now it’s time to pay the piper.

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27 responses to “Hell Freezes Over: Chichester Gets It Right”

  1. Anonymous Avatar
    Anonymous

    But hasn’t the general fund also raided the transportation fund, in the past?

  2. Groveton Avatar
    Groveton

    Jim:

    You wrote, “First, reports Chelyen Davis with the Free Lance-Star, Chichester warned Gov. Timothy M. Kaine not to address a projected $641 revenue shortfall by raiding the Rainy Day Fund, which is set aside for fiscal emergencies.”.

    Don’t you think that a $641M shortfall IS a fiscal emergency?

    In my opinion, giving Virginia’s politicians a “rainy day fund” is like giving a child a machine gun. Nothing good can come of it.

    They should soend the rainy day fund and then either cut spending (preferable) or raise taxes if they have a shortfall.

    I don’t trust Virginia’s politicians as a group and I wonder, based on their behavior, whay anyone else would trust them either.

  3. Toomanytaxes Avatar
    Toomanytaxes

    Groveton – The General Assembly, with the consent of a majority of Fairfax County’s Delegates and Senators, will simply abuse the taxpayers of Fairfax County yet one more time. Senator Chichester or his philosophic successor will recommend that some state tax be increased. The morons from Fairfax County will quiver in the face of editorials from the Post in favor of yet one more tax increase and vote for it. As a result, Fairfax County residents will be abused yet again. We’ll send dollars to Richmond in exchange for pennies and think we’re coming out ahead.

    Mark Warner’s tax increase cost Fairfax County residents slightly more than $107 million in 2005. In return, Fairfax County Public Schools received an additional $7.4 million in state aid for education.

    Chichester laughed all the way to bank. Fairfax County thinks Mark Warner is a hero.

    As I’ve said before, Virginia’s biggest rubes live in Fairfax County. Many of us may look down on those “southerners” who live in RoVA, but they know how to play us for big fools. Watch it will happen again.

  4. Jim Bacon Avatar
    Jim Bacon

    Anonymous 1:46, Yes, the General Fund has raided the transportation trust fund, which nearly everyone agrees (one of the few things anyone can agree about) was not a great idea. There was much discussion about creating a constitutional lockbox for the trust fund — although the idea seems to have died with a whimper.

    Groveton, a $614 million revenue shortfall would be a fiscal emergency if all the money had to come out of ongoing programs. But the General Assembly anticipated a large surplus. Fortunately, legislators decided to dedicate that surplus to one-time capital expenditures (much of it for roads) rather than increased programmatic spending. The shortfall is easily fixed by trimming or deferring that capital spending.

  5. Larry Gross Avatar
    Larry Gross

    the concept of treating your base operational budget – as distinct from your capital expenditures along with the idea that any surplus beyond the base budget is fair game to be spent for accelerating capital investments OR… deccelerated when there is a budget…

    … is, I agree, very sound.

    it’s the way we do our own budgets I suspect …

    so.. why is it such a political dog fight every time it happens?

    why not .. pro-forma?

  6. Larry Gross Avatar
    Larry Gross

    …deccelerated when there is a DEFICIT…

  7. Groveton Avatar
    Groveton

    Jim and Larry:

    Let’s set the table before we eat dinner.

    Public corporations like mine use accrual accounting. We cannot pretend that the money we spend to build a long lived asset counts as an expense solely in the year we spend the money. We have to depreciate the asset over its useful life.

    Capital is a balance sheet account. So is cash. Revenue is an Income Statement account. The way that a balance sheet account like capital is charged against an income statement account is through depreciation.

    So, I have very limited ability to fix a revenue shortfall by deferring long term capital expenditures. I certainly can fix a cash shortfall by deferring long term capital expenditures but not a revenue shortfall. In fact, if I try to fix a revenue shortfall by failing to build new revenue producing capital all I really do is guarantee future revenue shortfalls. Of course, this is only true because:

    1. We have the cash (or will debt to get cash) required to build the asset.

    2. We believe that the assets we are building will generate future revenue.

    3. We are a going concern (i.e, we expect to stay in business).

    4. We view the revenue shortfall as temporary and believe that (with the assets will will build) we will get back to a time when revenues meet revenus projections (for us – including revenue growth).

    So, where is Virginia in all this?

    1. Transportation is a key to continued revenue generation (i.e., economic development and the taxes that generates).

    2. The cash to build roads is available in the rainy day fund.

    3. The state is probably a going concern although the state legislature is doing its best to change that).

    4. The revenue shortfall is temporary, not permanent.

    By my logic, the state should use the cash to build the roads – regardless of this year’s “revenue” shortfall.

    What my company would do in a year where revenues are below forecast is to reduce our expense (vs. capital) budgets. First to go would be meetings, travel and entertainment budgets, bonuses, etc. Then we’d start laying off administrative employees. Then we’d have to look at production and sales employees.

    But stop building the very assets that will get us out of the revenue shortfall?

    That would be like slitting our own throats.

    Final note: Although I have used the term Revenue to describe the tax money collected by the state I object to that usage. Revenue is an honorable word that shoule be reserved for entities operating in a competitive environment where the customer has the choice of whether to spend their money on your products and services.

    Virginia does not have Revenue. It has money taken under force of law from taxpayers. I hope that someday the people in richmond will understand the difference.

  8. Anonymous Avatar
    Anonymous

    Very nice, Groveton.

    RH

  9. Groveton Avatar
    Groveton

    Toomanytaxes:

    You are as right as rain. If you go to a card game and can’t figure out who the pidgeon is – you’re the pidgeon.

    Fairfax County (and the rest of NOVA) is definitely the pidgeon in this card game.

  10. Groveton Avatar
    Groveton

    RH:

    Oddly enough, the professor who taught me intermediate accounting at UVA was named Hyde. He was also the CFO there at the time. He broke my neck with this stuff.

  11. Anonymous Avatar
    Anonymous

    Groveton:

    I have to say that your summary nicely captured more than three semesters of what my professors tried to say.

    RH

  12. Anonymous Avatar
    Anonymous

    And yes, the general fund has also raided the State Employees Parking Fund that was set aside from money paid by state employees to park in state parking lots in order to build additional parking or improve existing parking. And that was done so as not to raise your taxes.

    I agree with toomanytexas that for every dollar in taxes I pay that I should get a dollar back in public services. I also agree that for every dollar the taxpayers of one locality pays to Richmond they should get a dollar back in state services. That is only fair. If Wise County don’t get much back, too bad. They should move to Fairfax County.

    If only government operated more like the private sector, then it could fire personnel every time the revenue dropped. That is where the most money is spent – on those lazy public employees.

    By the way, if the private sector could run things more efficiently and with less cost, why did Virginia Power quit running the street cars in Richmond?

  13. Anonymous Avatar
    Anonymous

    I will freely admit that anonymous 8:51 raised issues that I had never thoght of, at least in that context.

    Congratulations for presenting a new perspective.

    I hope you will continue to contribute, even if we disagree.

    RH

  14. Anonymous Avatar
    Anonymous

    If we set the rainy day fund high enough, maybe we can call it an endowment.

    Imagine the day when we can cancel all taxes and live off of the interest.

    I have a number of close friends who mange to do it, why not the government?

  15. NoVA Scout Avatar
    NoVA Scout

    Chichester’s points don’t surprise me much. I know it’s not a widely held view in these parts, but I always thought Chichester’s positions were solid, fiscally conservative takes on how to manage the state’s finances. The reason he got to be such a bogey-man for the folks who have started calling themselves “conservatives” these days is that he insisted on revenue streams to match expenditures. Absolute party-pooper for folks who wanted to make their way in the world by opposing taxes, but didn’t want to do the grunt-work of paring away expenses or finding non-tax alternatives to fund pet projects. Chichester simply said: you can’t have it both ways. There are things that need to get done on the state level, it will cost money, and you have to raise tax revenue unless you’re willing to ignore the problems. It made the cartoon-Conservatives apoplectic. Chichester looks pretty astute when you look at what they ended up with in the tax increases at the end of last session. The New Right panicked, tried to put lipstick on a lot of revenue-enhancing pigs, essentially ended up where they would have been if the 2002 regional referendum had passed in NoVA and HR (of course now everything costs more and deterioration has had another 5 years to do its thing), got their abusive drivers’ fees enacted to fatten the pot, and now are backstroking away madly from at least some parts of their butt-covering labors. So this leads me to think that Chichester’s positions reflected a fair amount of fiscal horse sense, and that his more traditional conservative stewardship will be missed.

  16. rodger provo Avatar
    rodger provo

    nova scout said …

    I am in your corner … what a good
    posting…the state would be much
    better off raising certain taxes
    statewide to meet our needs so the
    burden could be shared with all
    motorists and truckers who use
    our roads instead of creating
    two regional authorities with seven
    new fines and taxes (that hit those
    of us who live in Virginia primarily)
    and those abuser driver
    fees that now only hit our residents …
    trying to meet our
    needs with unpredictable general fund
    surplus money is not a solid
    program to help us solve our bad
    transportation problems …

  17. Toomanytaxes Avatar
    Toomanytaxes

    NOVA Scout & Rodger — what about equity? That factor never seems to enter the debate. NOVA and Fairfax County in particular always seem to be at the head of the line for paying statewide taxes, but draggging well behind in terms of getting anything back.

    I’m not making the argument suggested by 8:51 that we should receive dollar for dollar back from Richmond. His/her implication that I did is flat wrong.

    I can support aid on the ability to pay. But I’ve seen the formulae used by the Commonwealth. They are not fairly related to income and costs of living, which truly reflect an ability to pay. I’ve seen work done by an economic consulting firm gratis that shows the correlation between income and state aid to education. For the period studied, it was .484. That is not strong correlation, but rather, reflect an unfair subsidy for RoVA.

    Given this track record, everyone in NoVA should be opposing any further tax increases on a statewide basis. Keep the subsidies as they are today, but don’t ever add a dime more. If you want better roads in Fredericksburg, tax yourselves.

    Moreover, Chichester has never addressed the issue that land use decisions are made without regard to transportation needs. The Tysons Corner Land Use Task Force is playing games with transportation in order to deliver density to a few landowners and big campaign contributions for Gerry Connolly.

    Last Tuesday evening, the TF’s chair said that the TF would probably not address the road needs in connection with Tysons Corner because they are regional. The statutes authorize Fairfax County to reject any further increases in density at Tysons Corner because of inadequate public facilities. The Comprehensive Plan does NOT need to be amended upward. But it will. Given a total disregard for the public interest, why should Fairfax County residents pay higher taxes?

  18. Anonymous Avatar
    Anonymous

    I still cannot get over this “Fairfax County is owed something because we pay more taxes.” If we applied that to federal expenditures, then Fairfax County would be at the level of, say, Brunswick County because Virginia [mainly NoVa] gets way more back in federal $ than other states. Perhaps you should speak to the people in South Dakota and rile them up!

    It is called the common good, maybe even Commonwealth. I think that it is somewhere in the Constitution or the Declaration of Indpendence. Some pay more so that others can benefit. That will always be the case unless the super selfish take over. I hate all of this “What’s in it for me.”

    Mr. toomanytexans is beginning to sound almost, gasp, communistic.

  19. Toomanytaxes Avatar
    Toomanytaxes

    Mr. Anonymous’ arguments are flawed. They read like an editorial from the Post. I have never that Fairfax County should receive dollar-for-dollar back from the State. Yet, she/he continues to suggest I am. Why?

    What I am arguing is that the method for allocating the amounts of money returned by Richmond to local governments is unfair, illogical and plain wrong. Two factors affect a community’s ability to pay — its income and its costs. Both factors should be considered on a statewide basis. The first is considered, but in a flawed manner. The correlation is less that 0.5. Let’s find a formula that produces results that are closer to 1.0. Then, my argument goes away. But 8:51 simply ignores this argument? Why?

    Also the basic aid formula for schools does not adequately address differences in costs to provide the same educational services. It costs more to operate a public school in urban/suburban divisions. The formula should reflect real cost differences, but doesn’t. If it did, I would not be complaining. Again, 8:51 will not address my arguments? Why not?

  20. rodger provo Avatar
    rodger provo

    toomanytaxes said –

    I think you are not accepting the
    fact that the job creation in the
    closer in suburbs is the source of major problems for the outer suburbs that are being asked to provide housing, schools, roads, etc. for many of the workers who hold jobs in Fairfax County, Loudoun County, Arlington County, Alexandria and now even Prince William County.

    This demand for additional public services is being felt in West Virginia, Winchester, Culpeper, Caroline County and King George County.

    Revenue being generated by the closer in suburbs needs to be shared with other communities to
    meet these needs.

  21. Toomanytaxes Avatar
    Toomanytaxes

    Rodger – I understand your points, but we are still dealing in generalized statements. Let’s identify resource issues; attempt to quantify them; and make appropriate adjustments. I’ve offered data. No one else will. That’s my problem. No one will match my numbers with numbers of their own. I assume this means that they are conceding mine are right and, accordingly, want to change the subject.

    Also, with respect to outlying areas and the need for public facilities. Virginia law permits these and all local jurisdictions to consider the impact of added growth on public facilities when they are reviewing their comprehensive plans. No one is putting a gun to the BoS’ heads. They have decided to approve added residential development. If they have done so in the face of inadequate public facilities, that is not the fault of Fairfax County. Moreover, they can insist upon proffers of sufficient cash or in-kind improvements if they feel the need to supplement facilities. It is not the responsibility of Fairfax County to pay facility costs in outlying areas.

    Finally, why don’t these jurisdictions aggressively lobby new businesses in competition against Fairfax County? They have the benefit of lower costs and less congestion. Show videos of traffic congestion in Fairfax County. Compete for commercial development; don’t ask for my tax subsidies to fund residential development.

    The close in suburbs have their own huge capital needs.

    Fix the formulae. Look at comparative income and actual costs.

  22. Groveton Avatar
    Groveton

    Toomanytaxes:

    Exactly!

    NOVA pay more in taxes than it gets back in services? Fine.

    But ….

    1. Tell me what the total transfer actually is – that’s only fair.

    2. Take cost of living into account when deciding who is really “rich”.

    3. Stop the mind numbing refrain that NOVA is failing to pay its “full locational costs”. Nobody knows whether this is true. Nobody knows whether NOVA pays its full costs with or without regard to location. However, what limited facts exist indicate that NOVA pays far more than its full costs. Maybe NOVA pays more than its full locational costs too. Who knows? Thanks to people like Chichester these answers are absent from the public domain.

  23. Larry Gross Avatar
    Larry Gross

    Convince me that NoVa.. traffic woes are, in fact, due to the diverting of taxes from NoVa to the state.

    I’m pretty skeptical.

    Yes.. it’s wrong… if the amount exceeds the real needs of the counties that receive more than they contribute.. (usually the money goes for schools and public safety).

    but.. let’s pretend that Fairfax and NoVa will get all of that money back.. but will continue their current policies of openingly embracing new jobs.. along with the reality that many new employees .. will not live in Fairfax/NoVa but instead commute from the outer jurisdictions.

    Will the money… that the state gives back… (remember we’re pretending here).. really make a difference?

    What would you spend the additional money on?

    Roads… that will serve more and more folks who commute from outer jursidiction homes to NoVa jobs?

    What I am trying to get at is .. let’s agree that Fairfax and NoVa get screwed on the tax deal…

    would that money.. really be the answer to the fundamental jobs issue?

    If not.. then isn’t it a canard?

  24. Anonymous Avatar
    Anonymous

    Mr. Toomanytaxes,

    Take a look at the tables in the Commission on Local Governments annual report on the revenue capacity, revenue effort and fiscal stress of Virginia’s counties and cities, specifically Table 6.3, and tell me that Fairfax County is treated unfairly. http://www.dhcd.virginia.gov/CommissiononLocalGovernment/Docs/stress05.pdf

    Please feel free to peruse the other tables about revenue capacity and revenue effort.

  25. Toomanytaxes Avatar
    Toomanytaxes

    4:40 – But my point remains, when you boil through all the studies and indices and actually compare the average adjusted gross income for each city and county in Virginia to the state aid formula for public schools, the result is a correlation of 0.484. There simply is poor correlation between people’s income by jurisdiction and the amount of state support for public schools received by jurisdiction. It’s farce. If ability to pay is truly measured by income, let’s develop a plan that has a correlation between income and state aid that is close to 1.0. The current formula is broken when measured by income.

    I’m not arguing against wealthier jurisdictions helping poorer ones. Perhaps, an example might help. Assume that state law were such that each city and county was required to impose real estate taxes that were equal to 2% of the average adjusted gross income for that jurisdiction, with the proceeds going to support public schools in that commuinity. (I’m not arguing that this is the correct number; I’m simply picked a figure for illustration.) At this point, it would be proper for the state to determine whether that amount of money that could be raised locally would be sufficient to operate a public school system on an efficient basis. Those communities whose “2%” was inadequate should be given state aid, which would come from taxpayers in wealthier jurisdictions. But what happens is some poor jurisdiction impose relatively high taxes on themselves; while others do not. Why is that fair to anyone? Why should I send taxes to Richmond to help a city or county that fails to tax itself adequately based on its average income? The current formula permits that and is wrong and unfair.

  26. Anonymous Avatar
    Anonymous

    Mr. Toomannytaxes, Your point is well taken and no one will argue with you – there is no such thing as a perfect formula for the distribution of government aid. There will always be winners and losers because the formulae are determined in a political environment and the factors that underlie them change over time. You mention the basics aid formula – I know of at least one study a decade on how unfair it is and the alternatives to change it. See the last JLARC study. The result? Lots of handwringing and no action. Sorry you feel that Fairfax gets the shaft, but that happenes every day in every state.

  27. Jim Bacon Avatar
    Jim Bacon

    Groveton, I think you are misunderstanding the way EMR and I use the phrase “full locational costs.” No one says that NoVa fails to pay its full locational costs; indeed, the notion is a logical absurdity. Regions don’t pay locational costs. Individuals and businesses pay locational costs. Municipalities and utilities within the region (as well as the state) either charge or fail to charge locational costs.

    Within a region, there are invariably some people who are paying more than their fair share of locational costs, some who are under-paying, and some who are paying the proper amount.

    The critique leveled against some Northern Virginia localities, as well as VDOT, is that they fail to charge a significant number of citizens their full locational costs. As a result, more citizens choose than otherwise would to live in locations that are expensive to serve with utilities, roads and public services. The consequence is that Northern Virginia localities wind up paying more for those utilities/services, etc. than they need too.

    I hope that clarifies.

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