James A. Bacon
Gov. Bob McDonnell has the right instincts: When it comes to preparing the next two-year budget, Virginia needs to brace for the worst. The governor has asked state agencies to submit proposals for achieving budget reductions of 2, 4 and 6 percent of their General Fund appropriations. And they have responded, flooding the governor’s office with ideas from the profound to the quirky — from closing 1,000 prison beds to scrapping funding for the dangerous dog registry — giving him many options to choose from. (See the Times-Dispatch story here.)
State revenues are forecast to grow 3.7% through the current budget year and 3.3% through 2013, but that’s not enough to cover the rising cost of state services and loss of aid from the federal government. And that’s the good news. The bad news? The failure of the congressional supercommittee to devise a federal deficit-reduction plan could trigger $1.2 trillion in automatic budget cuts, which will be divided equally between domestic and defense spending. With its economy so heavily tied to defense, Virginia could be especially hard hit. Meanwhile, there’s no predicting the impact on the U.S. economy of the European sovereign debt crisis or, a wild card, a possible melt-down of the super-heated Chinese economy. Never in my adult lifetime has there been so much uncertainty about where the economy is heading.
So, I’m in favor of penny pinching. Even if that means saving $45,000 by delaying the replacement of equipment at veterans cemeteries or selling Department of Forestry buildings, to list two ideas noted in the Times-Dispatch article. Two-percent cuts in affected agencies would yield $77 million in savings in the fiscal 2013-2014 biennium, while 4% cuts would save $147 million, and 6% would lop off $220 million.
The problem is that the economic uncertainties are so great that we could be talking about budget gaps measured in the 10 digits — $1 billion or more. Trimming and pruning line-item spending is necessary and good. But it’s not enough. If Virginia wants to close the long-term budget gap, it needs to fundamentally re-think how it delivers core services. At the risk of repeating previous posts, I would argue that legislators need to go for big, dramatic savings such as (in rough order of importance)…
Reform transportation and land use. The scattered, disconnected, low-density pattern of human settlement patterns prevalent in Virginia drive up the cost of utilities and public services for local governments and create inexorable demand for more state transportation spending. We need to re-think the zoning policies and funding mechanisms that promote sprawl. There is no need to resort to leftist social engineering — just insist that Virginians pay the full costs relating to where they live, shop and work, and give developers more freedom to pursue infill and re-development.
Build a market-based health care system. Now that Medicaid and employee health insurance are the fastest-rising component of state spending, Virginia should aspire to creating the most productive, efficient and innovative health care system among the 50 states. Primarily, that means creating new models for delivering health care, which requires more freedom for entrepreneurs to innovate and more flexibility in how Medicaid and private insurers pay for medical services.
Reinvent K-12 education. Bust up the monopoly of the public schools, increase parental choice and foster experimentation and innovation. Promote virtual learning. Encourage that incubator of testing and experimentation, “home” schooling, which is fast evolving into a sophisticated form of parental-led educational cooperatives. Allow parents to contract with teacher cooperatives. Government’s job should not be to educate every Virginian but to ensure that every Virginian gets an education.
In the new age of austerity we find ourselves, we must aspire to achieving mind-bending gains in productivity through audacious change. Tinkering on the margins of existing programs will lead to nothing but an endless and unsatisfying cycle of cuts, cuts and more cuts.