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Virginia’s
growing budget surplus has become an embarrassment
to Gov. Mark R. Warner and Lt. Governor Tim Kaine,
the Democrat who hopes to succeed him. Both played a
game of chicken with the General Assembly in 2004 to
force legislators to enact a tax increase that is
expected to generate $1.4 billion during the
2004-2006 biennium. Anti-tax legislators fought that
tax hike, insisting that rising state revenues would
meet the state’s budget needs.
The
claims of tax hike advocates that the
Commonwealth’s financial condition was desperate
and that such a huge tax increase was necessary to
avert disaster seem hollow a year later.
Virginia’s financial situation was not that bleak
in 2004 or Warner would have done more than simply
talk about reducing spending by $1 billion a year
through elimination of waste, as his Commission on
Efficiency and Effectiveness had recommended in
December, 2002.
Warner
now seems reconciled to this political reality.
He no longer touts his waste-cutting initiative and
seems defensive when his political opponents point
to the current budget surplus as evidence that
Warner’s tax hike was unnecessary.
But
his challenge to critics has a sting of its own. If
the tax hike was unnecessary, Warner asks, why are
those politicians who fought to block it now so
eager to spend the increased revenues? He has a
point. It’s time for conservative Republicans in
the General Assembly to consider either returning
some of the increased tax revenues to the taxpayers
or rolling back the tax increase.
Most
of the current surplus must go to the state’s
Rainy Day Fund (officially established by the
Constitution of Virginia as the Revenue
Stabilization Fund). Another, smaller sum will be
paid into a water quality improvement fund. After
those payments are made, there will be a substantial
amount of surplus money left, perhaps as much as
$100 million.
Warner
insists that any remaining surplus will be needed to
meet the escalating budget pressures from programs
such as education and Medicaid. He argues that those
two programs by themselves will soak up an
additional $2 billion in the next biennial budget.
If
Warner is correct, Virginia’s budget is simply out
of control. Taxpayers had better prepare for a
proposal to raise taxes every two years unless some
courageous politicians step forward with bold ideas
to curb anticipated spending increases.
What
Warner projects is a rate of spending that absorbs
all of the state’s near-term projected revenues,
including the increased tax revenues approved in
2004, during a period in which Virginia’s economy
is remarkably healthy.
What
happens when the economy slows down? What happens as
the rate of spending continues to grow faster than
the rate of revenue growth? Another tax hike?
The
Warner Administration has no comprehensive plan to
address this long-term budget problem. In fact, it
has actually added to the pressures to increase
Medicaid spending.
The
GOP-controlled General Assembly hasn’t shown any
true grit either. The only spending constraint the
Senate has pursued is a cap on car tax
reimbursements. Senate leaders dismiss any
suggestion that elimination of government waste is
worth pursuing.
Yet,
dealing with Virginia’s long-term budget pressures
remains a wonderful opportunity for Republicans.
They can earn voter confidence with a bold and
innovative strategy to meet Virginia’s challenges
without constant pressure to raise taxes, without
shoving more of the funding burden on localities and
without resorting to reckless borrowing.
To
date, however, too many GOP politicians are ducking
the tough decisions.
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August 8, 2005
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