|
Only
Bacon’s Rebellion gives you the real scoop on
the budget numbers missed (or misunderstood) by
reporters, pundits and politicians alike. If
we’re going to fight about this, let’s at
least stipulate some facts: It was a record
surplus. Revenue could actually shrink in 2006 and
we’d still make budget.
The
Virginia state budget finished with a general fund
surplus of $1,126,576,000 – one and one eighth
billion dollars. It was a record, at least in
terms of nominal dollars. To say it another way,
Virginia collected a record one and one-eighth
billion dollars more than it spent in fiscal year
2005. And that’s just the General Fund.
With
respect, the $544 million figure in the
Governor’s official announcement last week and
all the media accounts is not the real figure,
although he was careful to label it the
“revenue” surplus. But the folks in the House
of Delegates who love to challenge him seemed to
buy it.
The
figure that accountants look at – the unreserved
fund balance – was included in the handouts at
the legislative meeting but nobody mentioned it.
And the same number can be found in the comptroller’s
preliminary report, which, for its part, makes
no mention of any “surplus” of $544 million.
The comptroller can’t play politics with his
report – he reports cash on hand at close of
business June 30 and whether or it is reserved
(can’t be spent) or unreserved, designated
(already earmarked) or not.
I
didn’t realize the unreserved balance was a
record until I got a chance to compare it with the
chart, updated for this column, that I had
included in a September 7, 2004 column, "Reality
Check."
General
Fund Tax Revenue
Actual
Dollars (In $000's)
|
Year
|
Total
Revenues
|
Unreserved
Balance
|
%
of Total
|
1996 |
$7,281,744 |
$321,198 |
4.4 |
1997 |
8,130,917 |
644,840 |
7.9 |
1998 |
8,782,431 |
970,516 |
11.1 |
1999 |
9,716,193 |
983,041 |
10.1 |
2000 |
10,813,644 |
1,109,843 |
10.3 |
2001 |
11,149,890 |
200,953 |
1.8 |
2002 |
10,737,472 |
70,004 |
0.7 |
2003 |
10,987,756 |
243,997 |
2.2 |
2004 |
11,947,222 |
677,089 |
5.7 |
2005 |
14,128,013 |
1,126,576 |
8.0 |
Source:
Comptroller's GF Preliminary (Unaudited)
Annual Reports |
The
surplus certainly was not a record in actual
dollars adjusted for inflation, nor was it the
record as a percentage of gross revenue. Those
honors were earned in the Gilmore years. Gov. Jim
Gilmore had three years in a row where the balance
exceeded ten percent of the gross, and I don’t
remember his finance staff having its competence
challenged. When it happens on a Republican watch
it is called fiscal conservatism. (Yes, it is also
easier to claim that title when it happens without
tax increases.)
The
comptroller also reports the undesignated,
unreserved fund balance, which this year is zero
dollars. That means that right after
counting all the money in the bank at the close of
business June 30, it got designated to be spent on
something in this fiscal year. Easy come, easy go.
Most
of the fund balance went to the “Rainy Day”
revenue reserve fund. That account is almost full
now – they won’t be stashing that much there
next year.
Other
large beneficiaries are individual state agencies:
Some are allowed to keep their left-over cash
automatically (such as the universities), and
others were granted permission to do so by
Governor. Another $300 million was assumed to be
coming by the 2005 General Assembly when it wrote
the 2006 budget, so that was already appropriated.
The remainders went here and there – water
projects, BRAC, etc.
Three
other important (and ignored) items from perusing
the reports:
1.
General fund spending, as reported by the
comptroller, is up 34 percent so far in Governor
Warner’s term (see page 3). Growth is not
uniform. Education spending is up 49 percent, and
certainly by the end of the term he will be able
to tell interested audiences (Manchester? Sioux
City? The NEA PAC?) that he raised education
spending more than 50 percent in one term.
“General
Government” is up 38 percent but that is mainly
the car tax reimbursements to localities. Total
social services spending is up 35 percent (surely
Medicaid growth exceeds 35 percent).
But
General Fund spending on transportation, natural
resources and economic development, and capital outlay
are actually down from four years ago. And public
safety has risen only five percent in four years.
Governors do get to set priorities.
2.
Nobody is losing sleep about 2006 revenue. Actual
revenue in 2005 was so good it passed the forecast
for 2006 like a Porsche on the autobahn. The rate
of growth necessary to meet the 2006 forecasts is
negative 2.7 percent. Think about that for a
while. If we just equal last year’s revenue
we’ll be in surplus again. We can shrink 3
percent and make budget (but we won’t shrink, at
least not the general fund.)
3.
Well, somebody should lose some sleep –
transportation planners. While general fund
revenue grew at 14.8 percent, the transportation
revenues (outside the general fund) grew only 3.3
percent, barely exceeding their forecast of 2.8
percent. The mainstay, motor fuel taxes, grew only
four tenths of one percent on the year and missed
its forecast.
Think
about that, too. The really big jump in gas prices
came at the very end of the fiscal year. For
fiscal 2006, now two months over, the impact will
be felt over the entire 12 months – and what an
impact. The 2006 revenue forecast requires 3.5
percent growth in motor fuel taxes to make the
budget. Won’t happen. In fact, I predict we
won’t even match 2005 collections.
Good
sales tax collections (a portion of which is
dedicated to transportation) saved the fund this
year and might next year. But even with the higher
gas prices, traffic is unlikely to decline in this
great economy and if it does, that may only
increase demand on mass transit – equally
stressed for funding. Keep in mind the same thing
has to be happening with federal gas tax
collections.
This
disturbing trend was a major focus of the
governor’s address and the detailed briefing by
Secretary of Finance Bennett, right? Sorry. They
didn’t mention it at all. Doing that would beg
the question, what are you going to recommend in
your final budget?
--
September 5, 2005
|