As veterans of the 2004 tax debate recall, Warner administration officials forecast that Virginia would face chronic budget deficits within a few years. Thanks to the 2004 tax increase — and economic growth — Virginia now may be facing chronic budget surpluses. The magnitude of these surpluses are obscured by the wise General Assembly practice of spending hundreds of millions of dollars in one-time investments — roads, Chesapeake Bay clean-up, mental health restructuring — instead of ramping up spending for ongoing programs. But the surplus of revenue over spending on ongoing programs continues to be large.
Now we’ve entered a new budget cycle, and once again Virginia is running ahead of forecasts. In her August report on state finances, Secretary of Finance Jody Wagner reported that General Fund revenues for July and August 2006 had increased 8.6 percent over the same period in 2005 — double the 4.2 percent increase estimated in the budget.
By way of caution, July and August are not major revenue-generating months. September, Wagner notes, will provide a more reliable indicator of where the budget is heading. However, when legislators meet in a few days for the special transportation session, July/August budget numbers are all they have to go on. Given the chronic, recurring budget surpluses that Virginia has been running since 2004, it is increasingly difficult to make the case that the state needs to raise any more taxes.