In recent years Virginia legislators have relied increasingly upon “an array of budget gimmicks, accounting sleights of hand, and one-time deals” to balance the budget, contends the Commonwealth Institute in a new paper, “Shell Game: Virginia Balances its Budget with Cuts and Accounting Sleights of Hand.”
Authors Sara Okos and Michael Cassidy have made the same point before, although they buried it in reports on broader topics. In this policy brief, they throw the spotlight on the subterfuges that politicians adopt to “balance” the budget at the expense of the commonwealth’s long-term fiscal health. Most of these tricks will be familiar to regular readers of Bacon’s Rebellion because we have castigated them as well. Still, it’s helpful to line them up all in a row just to see how many scams the politicians have been pulling on citizens and taxpayers.
The 13-month year trick. In 2010, the General Assembly required large retailers to estimate their receipts for the first month in the following fiscal year and send in the sales tax payments early. Presto change-o, 13 months of revenue in only 12 months for a pick-up of $27.7 million. But those revenues came at the expense of revenue in later years. The legislature is still unwinding this gimmick.
I’d gladly pay you Tuesday for a hamburger today. In 2011 the General Assembly allowed the McDonnell administration to accelerate previously authorized bond sales so the state could borrow at low interest rates and build roads while bids were low. But much of the money, proceeds from the s0-called GARVEE bonds, was borrowed against future federal transportation grants. Thus, much of the spending today comes at the expense of spending in the future.
Borrowing from state employees. In 2010, the General Assembly deliberately underfunded the Virginia Retirement System below levels recommended by the system’s actuaries. Writes CI: “This included delaying or suspending a whole fiscal quarter of contributions for state employees and teachers.” The state is in the process of paying that money back. But meeting those obligations comes at the expense of pending in other areas.
One-trick pony. Last year the federal government reached a $25 billion mortgage settlement with five of the nation’s largest loan services, resulting in a $65.9 million payment to Virginia. Only $7 million went into the state’s Housing Trust Fund. The rest of the one-time settlement will be used to meet education costs related to inflation, retirement and the Virginia Preschool Initiative.
A bit unfairly, the report recounts other gimmicks that the General Assembly rejected, such as abusive fees for reckless driving and similar offenses, which it passed and then repealed, and Gov. McDonnell’s unsuccessful effort to sell the state’s liquor stores to raise money for transportation projects. We shouldn’t blame lawmakers for tricks they pondered and then rejected. The hocus pocus they actually did engage in is grounds enough for outrage.
CI’s conclusion:
The gap between the resources we need to support our modern and growing state with a booming population and growing demands for roads, sewers and other infrastructure has created annual budget shortfalls for more than a decade. Yet the state has ignored the problem, imagining we can cut, borrow and contrive our way to prosperity. Lawmakers have played games with existing resources in a desperate move to avoid talking about real solutions to our revenue problem. That kind of shell game is unsustainable.
My big problem with this conclusion is that CI implies, without coming out and saying so, that the “real solutions to our revenue problem” entail higher taxes. No, the solution is fundamentally re-thinking the way we deliver core services such as K-12 education, higher ed, transportation and health care. But one thing we do agree upon: Our current path is reckless and unsustainable. Something has to give.
— JAB