Over the past three decades, state governments enjoyed steadily growing revenues. That felicitous trend ended abruptly in the 2007-2009 recession and shows no sign of resuming. This chart, taken from the “Fall 2011 Fiscal Survey of the States” shows the weak recovery. As the stock broker ads always warn, past performance is no guarantee of future performance. Still, it’s hard to conjure up a scenario in which state revenues suddenly stage a rebound.
The situation for Virginia looks somewhat better. In fiscal 2011, Virginia General Fund expenditures increased 4.5% compared to a national average of 4.0%. In fiscal 2012, Virginia expenditures are projected to increase 7.1% compared to a national average of 2.9% (see Table 6 in the Fall 2011 survey).
Looking to the future, of course, the big wild card for Virginia is what happens if federal spending falls off a cliff? The chart below, just published by Veronique de Rugy at the Mercatus Center, shows that Virginia’s economy is the second most dependent of all states upon federal spending. (And unlike Alaska, we don’t have vast oil wealth to fall back upon.)
