Bacon's Rebellion

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McDonnell Budget: Touches all the Bases

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James A. Bacon
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mcdonnellby James A. Bacon

In his last hurrah as governor, Bob McDonnell has submitted his proposed biennial budget for 2014-2016. The document has won bipartisan praise, including from Sen., Janet D. Howell, D-Fairfax, a member of the Senate Finance Committee. While quibbling with a few details, she told the Times-Dispatch, “Overall, for a budget, this is one of the best I’ve ever seen.”

Any time the political class comes to an agreement on anything, I reach for my wallet. Maybe this is a good budget, maybe it isn’t. I won’t be satisfied that it is until we’ve had a chance to drill into the numbers.

We do know this: General Fund revenues are expected to grow 4.2% in Fiscal 2015 and another 3.9% in Fiscal 2016. That’s a modest growth rate for this stage in the cycle when companies are expanding, incomes are rising and unemployment is dipping. Compared to this stage in previous business cycles, this is not runaway spending.

Moreover, the budget is built upon numbers that are defensible, if not “conservative,” as the governor’s budget documents describe them. Revenues are predicated upon real GDP growth of 2.1% this year, 2.8% in in 2015 and 3.2% in 2016. Personally, I’m not so optimistic — I don’t see how growth can accelerate much if the Federal Reserve Board winds down its quantitative easing. But, then, the numbers aren’t outrageous. Furthermore, the governor wisely assumes that sequestration-racked Virginia continues to grow slower than the nation as a whole.

Budget growth is concentrated in the Non-General Fund expenditures, which the governor does not emphasize in his press release. The growth reflects the transportation tax increases passed in the 2013 legislative session. The Virginia Department of Transportation will get $1.06 billion more, and the Department of Rail and Public Transportation net an extra $344 million.

Regarding the more fiscally constrained General Fund budget, the winners (in absolute dollars) are:

  • $583 million extra for K-12 and pre-K
  • $183 million extra for higher ed
  • $55 million extra for public safety
  • $38 million extra for mental health

Meanwhile, if all goes well, the Rainy Day Fund will reach $1 billion by 2016, debt service will increase by $197 million, and the state will kick in an extra $315 million for state and teacher pension benefits, “representing funding at 80 percent of the full pension contribution rates, as well as funding for the 10-year scheduled payback of deferred employee retirement contributions from fiscal years 2011 and 2012.”

Closing the remaining 20% gap in funding the pensions is not an issue that the governor addressed. Fixing more than half the shortfall was accomplishment enough for one term in office. It’s only fair that the next guy gets something to worry about.

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16 responses to “McDonnell Budget: Touches all the Bases”

  1. Breckinridge Avatar
    Breckinridge

    Nothing so defined his term the leaving of it….

    It is a classy budget. You will recall that Tim Kaine packed his final budget with a tax increase he “assumed” would pass, and then proceeded to spend all of the “assumed” dollars it would raise. That meant McDonnell would have to be the bad guy, spike the tax increase and tell all those entities and agencies with their hands out, too bad — you ain’t getting it.

    Kaine and Warner both had a bad habit of packing real legislation into the budget bill, another bad practice conspicuous in its absence from this document. There is no section 5 in this document and I haven’t found any bombshells elsewhere yet. Not even fee increases.

    And McDonnell left a whole $50 million unallocated, the highest such bequest in more than 20 years. (He’s hoping that means the General Assembly will not change as many of his priorities. Nice try. His budget is fair game from the first page on.)

    It grates on the ears to hear all this praise of “surpluses” when in reality they reflect a failure to fully fund the pension plans, and any dollars left over are already earmarked by statute for various programs. The only real surplus is the Rainy Day reserve fund. But the state has kept its AAA rating honestly and this budget maintains it.

    The REALLY good news for McAuliffe is that it is based on very conservative revenue and economic growth estimates, so any upside on the economy will give him boodle to work with.

    1. reed fawell III Avatar
      reed fawell III

      Yes, I agree with Jim, a good perspective indeed. And I too miss the RINO days of the GOP Federalist party.

      This budget would seem to be more evidence of Robert McDonnell’s decency streak. I was not aware of Tim Kaine packing “his final budget with a tax increase.” It recall’s Md. Governor Parris Glendening’s final budget that raised the salaries of Maryland state employees knowing full well the the money was not there to pay them. The sole purpose of the move was to embarrass the incoming GOP governor while wrecking the state’s budget at the same time. Its hard to imagine a more cynical public policy.

  2. James A. Bacon Avatar
    James A. Bacon

    Good perspective. I do recall Kaine packing that tax increase into the budget he submitted to McDonnell. No such tricks this time. And the unallocated surplus is a nice gift to McAuliffe. Other than jacking up taxes for a business-as-usual transportation plan (we’ll just have to disagree about that), I’d say McDonnell has done a pretty good job with the budget.

  3. larryg Avatar
    larryg

    wait a minute. I thought McDonnell was responsible for “the biggest tax increase in the history of Virginia”?

    but one more and this sorta proves that Bacon and Breckinridge are the Blues Rino Brothers.

    on the right, I hear outrage.. that we finally got a big of a surplus and instead of giving it back to Virginians after some very tough years.. McDonnell is spending it all just like the Dems do.

    Please tell me this is not true and that the guys on the right have it wrong.

    1. Breckinridge Avatar
      Breckinridge

      As I’ve said before, RINO is among the nicer things I get called. I’m from the (dying) Federalist wing of the late lamented GOP of glory days….

      1. larryg Avatar
        larryg

        well I wish there were more like you… and lament what has happened to your neck of the woods.

  4. larryg Avatar
    larryg

    re: “big” = “bit” … geeze

  5. TMT Avatar
    TMT

    Here’s one that should get DJR going. Using personal income tax as the allocator, Fairfax County will likely produce at least $129 M of the $583 M for K-12 and pre-K. And we should get in the neighborhood of $76 M back, using a rough allocator of 13% – the percentage of students. Actual totals should be uglier. I’ll bet you 98% of Fairfax County residents who voted for McAuliffe are probably orgasmic about the additional money coming to the County. I need to retire where my neighbors are smarter.

  6. larryg Avatar
    larryg

    worse than that – I hear McDonnell is recommending they get rid of the cost-of-living supplement.

    ” McDonnell’s budget also proposes changes to the cost of competing, which was created to help provide competitive salaries in areas, like Loudoun, that have the highest cost of living and highest salaries in the state. The amount of money increases the closer jurisdictions are to Washington, DC.
    However, McDonnell’s budget would eliminate the cost of competing adjustment for school system support personnel only in Northern Virginia, limiting the funds to educational positions.
    The issue was a fight in the General Assembly during this year’s session and at least one legislator is not pleased to see it brought back for debate.
    “Last year, I fought hard to restore cost of competing funds for Northern Virginia school divisions that Governor McDonnell cut from his budget,” Sen. Mark R. Herring (D-33) said. “We were successful in getting the funding partially restored; however, the governor is once again proposing to cut $12.2 million from Northern Virginia schools.”

    I swear.. McDonnell is screwing over NoVa worse than Kaine and Warner ever did.

    😉

  7. TMT Avatar
    TMT

    Larry, most Fairfax County residents wouldn’t understand. They think money from the state is put in the coffers by Santa Claus. As I said, when I retire, I need smarter neighbors.

  8. larryg Avatar
    larryg

    would you not retire if they don’t get smarter?

    😉

  9. TMT Avatar
    TMT

    I cannot even think about it until both kids graduate from college and become self-supporting. One should do that next May (at least the first part), but the other is only a freshman.

    Actually, what I’d like to do is move to one of the Carolinas and continue to work with the law firm with which I am Of Counsel, coming to D.C. as needed. I have colleagues who live all over the US and are virtually in our local office here. One of my old bosses’ father was a lawyer in South Dakota and he puttered away into his 90s, working when he wanted and for whom he wanted. I always admired that.

    But I’d rather live in a community that has figured out how to pay the least to the state and get the most. Too many people in Fairfax County are too consumed with their own egos and are played for fools by those rural hicks downstate.

    1. reed fawell III Avatar
      reed fawell III

      Sounds like a great plan. They sure have made it near impossible for most folks to have much fun practicing law these days.

  10. larryg Avatar
    larryg

    I know a guy – a pediatric psychiatrist … moved to the mountains and became a consultant using a cellular internet connection.

    He spend a good number of years doing the consulting and salting away the money to pay off his mountain retreat then he “retired” again.

    Oh.. and he and his wife put 5… yes FIVE kids through UVA. Mom, Dad and the five kids are all UVA grads..!!!!!

  11. NewVirginia Avatar
    NewVirginia

    It is a great budget and certainly credit goes to McDonnell. It is relatively easy to budget well when times are good and the pot is growing.

  12. larryg Avatar
    larryg

    and give McDonnell credit for this statement also:

    “The fact that I will not be governor when you deliberate upon my introduced budget presents an institutional challenge. I do hope that at some point Virginia’s unusual election-budget development cycle will be fixed to end the awkward practice of the outgoing governor putting forward a brand new two-year budget. This is not the point where an outgoing governor would usually embark on major, new programs, but rather a time to solidify past policy initiatives. My budget makes room for both! ”

    he goes on to say:

    “We have talked many times about the “Virginia Way” by which we govern. We analyze and debate budget and policy issues passionately but civilly. Then we find common ground and solve problems. The Virginia Way is one of sharing credit for getting positive results for the good of our people. Eight million people are counting on the Virginia Way continuing!
    This approach is especially important today when my introduced budget is handed off to a governor-elect of a different party. ”

    I guess there are some different ways of looking at this but one way might be to say that the “Virginia Way” limits not only the power of the Governor but essentially only gives him limited opportunity to make huge changes –

    and not that he is prevented entirely from doing so – who would have thought that Va would pass an increase in transportation taxes much less it would be a GOP governor that did so!

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