Virginia's growing financial woes is a ballooning
deficit of candor. My analysis of the state's true
financial condition was the basis of candidate
Warner's winning fiscal message, the one we put into
writing on the key pages of his Action Plan for
Virginia. Since then, the "structural
deficit" -- the sum total of all the gimmicks,
fixes, embedded fiscal time-bombs and off-the-books
debt that has been used to "balance"
current budgets at the cost to future budgets -- has
grown to at least $4,500,000,000 and surely
many hundreds of millions higher.
have not been given access to the state's official
books. Our elected officials have long been
promising "truth in budgeting." But
if the governor, House Speaker Bill Howell,
R-Fredericksburg, Senate Finance Chairman John
Chichester, R-Fredericksburg, House Appropriations
Chair Vincent, R-McLean, Secretary of Finance John
Bennett, or anyone else advising either the governor
or the General Assembly on fiscal matters want to
disagree with the thrust of the analysis to follow,
then let them give me a chance to review the state's
They will not, indeed can not. Despite months of
promising just such honest talk, our state's
political leaders have put Virginia into a
tightening fiscal straitjacket that would be the
envy of the weavers in Hans Christian Anderson's
fable The Emperors New Clothes. Their claim
that the state's budget is "balanced" is
made out of whole cloth.
Unfortunately, the editorial boards of too many of
our state's newspapers, led by the usual voices, are
intent on focusing on a three letter word - TAX - as
if raising taxes in 2004 or 2005 and giving this
crowd in Richmond more money is a sure fix for this
gapping Structural Deficit. They still don't get it:
higher taxes is only a guarantee of higher taxes.
The new tax money might be used for many things,
including an offsetting of the revenue impact of a
further elimination of the car tax.
In that case, higher taxes is a guarantee of only
one result: Lt. Governor Tim Kaine, or whomever the
Democrats nominate for Governor in 2005 will
get blamed for the tax increase, and Attorney
General Jerry Kilgore, or whomever the GOP nominates,
will get credit for the tax cut.
Admittedly, JFK said, not long before his death,
that "Life is unfair." As the record
shows, I have not been afraid to tackle the odds and
defeat life's unfairness in the political world.
But it is one thing to fight the good fight: it is
quite another to be willing cannon fodder to feed
the empty rhetoric of others.
Moreover, the editorial writers and others leading
the charge for higher taxes are looking through the
wrong end of the fiscal lens. As I will show below,
they are missing the real story, and perhaps for
good reason. In politics, it is always easier to
proclaim your good intentions and then find someone
to blame for your lack of follow-through.
these same editorial boards. They are slowly going
into public revolt over what they perceive as
Governor Warner's lack of leadership. Yet they
themselves have yet to propose, much less endorse,
innovative ways to stop the fiscal bleeding.
they show no learning curve on politics, as if being
a broken record is all that is required of a leader.
I imagine that Warner would say this: My approval
rating is 70 percent in the polls. Why should I walk the
plank when I can stay popular by holding down
expectations, especially if Republicans are willing
to play the same game for their own political
Folks: Implementing real change is hard work. It
takes real commitment to real principles and in
Virginia, as a legacy of the Byrd politics, anyone
challenging the political establishment must be
willing to accept huge risks, and not just political
That is why so few people -- especially those with anything to
risk -- every try. Those who know history
and human nature have long felt the great wonder of
the American Revolution is not that we rebelled
against servitude to King George but that the
leaders of the revolution were among the
wealthiest and most privileged, ones the King would
gladly have cut a deal with.
Mark Warner wants to be in the U.S. Senate in 2006,
or even vice president in 2004. And why not? There
aren't any other Democrats stepping forward to do
battle for the job.
As I have written in the national newspapers, only
in Virginia do our editorial writers and political
analysts attack the qualifications of their
governors for national office. Californian Ronald
Reagan was pushed for national office at the GOP
Convention even though he was only in the second
year of his first gubernatorial term. For those who
follow politics, the same was true with Georgia
Governor Jimmy Carter who eventually became
president, and New York Governor Nelson Rockefeller
who eventually became vice president. They were
considered qualified despite being in their first
term. Illinois Governor Adlai Stevenson served one
term but was twice nominated as the Democratic
presidential candidate. The great FDR was only in
his third year as governor when he started running
for president, and the same for New Jersey Governor
Governor Jerry Brown won seven presidential
primaries despite having served less than two years
in Sacramento. In 1964, rookie Governor George
Romney of Michigan was being pushed as a compromise
choice at the Republican National Convention.
Yet here in Virginia, our Governors are treated as
chopped liver by the state's press, editorial
writers and pundits. Would they be qualified if they
were governors of a larger state?
In our system, you cannot fault a politician for
having ambition, since there is not a single case in
modern American history where someone was primarily
elected president based on his or her record as a
governor or senator. For example, Mario Cuomo was
governor of New York, and hailed for more than a
decade as the most qualified Democrat to be
President. Yet his mystique and image were
based on speeches he gave in San Francisco and the
University of Notre Dame, along with his sharp
repartee on the Sunday morning talk shows. His
record as governor was an afterthought, and for good
reason: He was the Gertrude Stein of the modern
governorship, there being, as she said about
Oakland, "no there
In the TV age, unless you run for president or vice
president, you are not considered a national player.
For example, Lyndon Johnson is widely regarded as
the most powerful and perhaps most important senator
of the last century. But he got to be president only
because he gave it all up to be vice president, a
move seen at the time as the end of his career. His
experience is the norm, not the exception.
Thus, asking Gov. Warner to risk his political
capitol to fix a problem that will not be his in a
year or two is easy for the newspaper elite to
opine. They have never been on the front lines. Some
of us, however, actually have a record of real
political leadership -- on the front lines -- on
such issues as race, finances, abortion, political
reform, and opening up the politics of Virginia for
all her children to have a chance at being all they
So, today, let the chief budget and financial consultant
to the only Virginia governor to ever win national
recognition as the best fiscal manager in the
country have an honest talk with the people of
Like the boll weevils who once ravaged the South's
cotton industry, Virginia's fiscal weasels have
burrowed even deeper into the Ponzi scheme they have
erected. As they chew at Virginia's fiscal roots,
the state's true structural deficit grows
how the numbers shake out:
Rainy Day Fund. When the governor took office
last January, the state's Rainy Day Fund - something
I helped create -- had grown to nearly a billion
dollars. These monies were intended to offset
unexpected emergencies, not be used as bailout fund
for our politicians. The savings have now been
mostly depleted and must be rebuilt.
K-12 Standards of Quality. Last year, General
Assembly leaders admitted the budget shorted
localities by one billion dollars owed them in state
K-12 education funding. This year, the Republican
head of the State Board of Education said the real
shortfall was actually $1 billion more. Last week, a
check of the fine print in the state budget - Item
D, Chapter 1042 - confirmed that state funding for
higher education falls short by $700 million a
budget cycle below what had been promised in 2001.
Tax. Not long ago, Warner aides said the
Governor would include the final phase of the car
tax law in his last budget submission. But even if
he retreats from such fiscal madness, current state
law says once the economy returns to normal growth
patterns, the car tax phase-out automatically goes
to 100 percent, creating yet another $1 billion
dollar budget hole.
Assorted Raids and Gimmicks. Then,
there are those past gimmicks from the CPA Hall of
Fame, the money now gone but the obligation to make
good remaining. This list includes $300 million
"diverted" from the Transportation Trust
Fund, $60 million "raided" from the
Literary Fund, $120 million in sales tax revenue
"borrowed" from future budgets, a $200
million gubernatorial promise to include estate tax
repeal as part of "tax reform", selling
assets from one state agency to another for $40
million, a recently admitted $70 million dollar
shortfall in state Medicaid funding in the next
budget, $30 million in extra income tax withholding
that is counted in the current budget but has to be
returned in the next budget, and a combination of
gimmicks used to reduce the state's legally mandated
contributions to the Virginia Retirement System by
roughly $100 million.
In addition, a new politically "painless"
idea is circulating at all levels in Richmond:
giving localities 5 percent of the state's
individual income tax collections. This would create
still another billion-dollar structural hole. Yet a
bipartisan legislative panel looking at "tax
reform" has glowingly cited a Governor's
Commission on Government Finance that endorsed this
three-card Monte scheme.
Solving these structural deficit problems will take
leadership and more than one General Assembly
Session. But here are three fundamental steps we
Democrats can challenge Republicans to do right now.
First, pass a "Put K-12 education First"
law." This new initiative would require the
state to fully fund it's statutory and
constitutional commitments to local education before
completing the car tax law. This continuing failure
is one reason local property taxes are rising in
Democrats need to champion the first-ever General
Obligation Bond for elementary and secondary
education facilities, giving it a priority as
finances allow with strict accountability measures.
The state's broken educational promises
disproportionately hurts school children in our
rural and poorer areas. Right now, the state SOQ
funding equations do not
take into consideration the need for these areas to
provide for repair and construction for these
centers of learning.
studies say Virginia may soon be losing upwards of a
billion dollars a budget cycle due to the failure to
collect sales taxes legally owed on e-commerce and
other interstate sales. Whatever it takes, we must
take the helm and demand that federal and state
lawmakers stop playing the politics that allows this
money to go uncollected. The current federal
moratorium on taxing certain Internet purchases does
not apply to the collecting of
Virginia's sales and use tax and was never so
Admittedly, these are only the beginnings in what
will now doubt be a 12-step program. But I see them
as a test of good faith: If our politicians will not
take these steps -- none requiring any new taxes --
then they are truly part of the problem, and have no
real intention of being part of a sensible solution.
As a rule, Democrats have more passion for social
issues than fiscal ones. But this is shortsighted:
it will always prove impossible to do what we know
is right as regards the former without doing what is
also right on the latter.
When a patient is bleeding to death, the doctor has
got to first stop the life blood from oozing out.
Otherwise, no amount of new blood is going to help
in the long run.
-- June 2, 2003
(c) Copyright. All rights reserved. Paul Goldman.