Bacon's Rebellion

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Is Debt An Option to Cover the Budget Shortfall?

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by

James A. Bacon
in

Uh, oh, I’m on public-policy overload right now! We’ve got the Governor’s energy plan, a GOP health care initiative, and an ongoing war of words over the budget. Let’s start with the budget…

When last I reported, senior GOP legislators in the General Assembly had urged Gov. Timothy M. Kaine not to dip into the General Fund to address this year’s revenue shortfall. (See “Don’t Touch the Rainy Day Fund.”)

The Governor responded assertively. First, the revenue shortfall meets the constitutional trigger to use the Rainy Day Fund. Second, he has requested state agencies to tighten spending, and he plans to announce mid-year cuts. Third, he is exploring some options, including “changing the timing or manner of capital spending.” And fourth, he is holding onto the option of using reserve fund revenues if he absolutely needs to.

Now Sens. Walter Stosch, R-Henrico, and William Wampler, R-Bristol, have shot back: What’s this about changing the “manner” of capital spending? “As we all know, there are only two means of financing capital projects — cash or debt. Given that we are currently using cash, we read your response as indicated that debt is now an option.”

I am interested to see the Governor’s retort to that piece of deduction. You can read the complete letters here:

Sept, 10, 2007, letter from Del. Vincent F. Callahan, R-McLean, Del. Lacy Putney, I-Beford, Sen. William C. Wampler, and Sen. Walter A. Stosch.

Sept. 11, 2007, letter from Gov. Timothy M. Kaine

Sept. 12, 2007, letter from Sens. William C. Wampler and Walter A Stosch

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9 responses to “Is Debt An Option to Cover the Budget Shortfall?”

  1. Jim Wamsley Avatar
    Jim Wamsley

    “As we all know, there are only two means of financing capital projects — cash or debt. Given that we are currently using cash, we read your response as indicated that debt is now an option.”

    Good. We will not use debt.
    Cancel the I-495 HOT Lane Construction
    http://baconsrebellion.blogspot.com/2007/09/i495-hot-lane-construction-begins-in.html#comments

    No need for a 75 year debt repayment scheme.

  2. James Atticus Bowden Avatar
    James Atticus Bowden

    What budget shortfall?

    Show us the numbers!

  3. Larry Gross Avatar
    Larry Gross

    ummmm…

    let’s tell the counties that they cannot use debt to build schools or expand water/sewer or EMS stations.

    for that matter – let’s do away with home mortgages…

    oh.. almost forgot.. all those Wall Street guys that rate Virginia .. what is that about again?

    my, my….

  4. Anonymous Avatar
    Anonymous

    You can reasonably use debt when you are sure that it will free up a cash stream that will generate a sufficiently positive ROI, after accounting for the debt costs.

    You can reasonably use debt when paying for things that last a long time. There is no reason to pay for something all at once which will be used up incrementally over a long time. In this case, debt is a reasonable way to insure that future new residents pay part of the cost of infrastructure that exists when they arrive.

    RH

  5. Anonymous Avatar
    Anonymous

    Sept 11 letter is not Kaines it is the same as Sept 12 letter

    Can you fix that?

  6. Jim Bacon Avatar
    Jim Bacon

    Anonymous 10:08. Problem fixed. Thanks for pointing it out.

  7. Groveton Avatar
    Groveton

    I don’t let my 14 year old have a credit card because he lacks the maturity and common sense required to effectively manage debt.

    I feel the same way about the politicians in Richmond.

  8. Larry Gross Avatar
    Larry Gross

    I’ve often thought of this and there are some that advocate cutting and cutting – until some important function is no longer provided.. then going back and re-funding that one … but the one’s you never knew went away… good riddance.

    but the deeper problem is that some functions _are_ needed but the way they work with government funding is so grossley inefficient that it it intolerable….

    so then we try to NOT let the government provide ANY service than can be provided by the private sector (I say .. try) and then only let government be funded for those services that cannot/willnot be provided by the private sector.

    In my mind – Roads should not be one of those..

    but I struggle with education which is so important both ethically and economically…

    and I think taxpayers are their own worst enemy when it comes to things like education because they look at it in terms of how it can benefit their own kids – and not how it is strategically important in preparing kids so that when they grow up – they become tax-payers instead of wards of the state (a euphenism for other taxpayers).

  9. Anonymous Avatar
    Anonymous

    We have the technical ability to track kids future income and trace it back the expenses associated with the schools they came from.

    Then we can figure out ROI and where to spend money to improve it the most.

    RH

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