Rebel With a Cause

Paul Goldman

Fiscal Straight Jacket


Candidates Wilder, Warner bought my strategy of honest talk on fiscal issues. Terry, Beyer didn't. Now comes 2005. VA's budget is not "balanced";  it has a $4.5 billion structural deficit.


Behind 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.

I 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 financial books.

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.


Take 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.

Moreover, 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 purposes?

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 ones.

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 Woodrow Wilson.

California 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 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 can be.

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 Virginia.

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 ever wider.

Here's 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.

Car 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 some areas.

Second, 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.

Third, 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 intended.

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. 2003.


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Paul Goldman, the Rebel With a Cause, was chief political strategist for the past two winning Democratic governors in Virginia and was credited with leading a "revolution in American politics" by The New York Times for his role in breaking America's 300-year-old color barrier in national politics.


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