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.