red ink is rising around Virginia’s budget. Politicians are scrambling for items
to trim and pare, while others are clucking their
tongues in self-satisfaction.
have no right to do so. Behind every budget
crisis, including this one, there is a bipartisan
gaggle of pols who gleefully voted to increase
spending, even when prudence and common sense,
dictated that a bit of restraint was in order.
why it was interesting, if also ironic, to read
this bit from House Appropriations committee
Chairman Lacey Putney. It’s not our fault
we’re this hole, it’s the process that’s
2004, then-Governor Warner stated that the tax
increase approved by the General Assembly would
align our longer term revenue and spending
requirements. Clearly, this did not work. The
fact that state spending continues to grow
faster than revenue growth is not indicative of
the need for more revenue, rather the need for
spending reform. Last session, Governor Kaine
continued to press for new spending initiatives
despite the looming economic downturn.
Obviously, creating new programs without a
corresponding reduction elsewhere is a recipe
for fiscal disaster.
a fair assessment, if one ignores the central role
legislators play in the budget process.
if Virginia needs spending reform, what should it look like?
starters, it must, of necessity, take a measure of
discretion away from the political class.
And for some (including me), that means
instituting a tax and expenditure law.
generally work around a couple of principles:
Spending increases are limited to some combination
of inflation and population growth and any excess
revenues are rebated to the taxpayers.
These are tough laws, designed to keep
politicians on a very short budgetary leash.
Because they tend to take a lot of the fun
out of being a legislator, politicians generally
oppose them, as do the numerous interest groups
and associations dedicated to milking the public
would a Virginia TEL work? A few years back,
Stephen Slivinski and Michael New wrote a study
on just that topic for my employer, the Virginia
Institute for Public Policy:
TEL for the
should include limits on the growth of spending
and revenue. That is to say, state spending and
revenue should not grow in excess of the sum of
population growth plus inflation. The source of
data for this calculation (such as the U.S.
Census Bureau) should be clearly outlined in the
amendment to avoid political gaming of the
underlying benchmark for the TEL.
what spending the limit restricts is vital.
Putting a cap on too narrow a base of
expenditures, or only for particular
“on-budget” expenditures, will encourage
politicians to move more spending
“off-budget” or increase spending in
noncapped categories. Thus, it is important to
define the spending subject to the cap broadly.
The spending that is capped should include all
state fiscal year spending except expenditures
for refunds of any kind or expenditures of money
received from the federal government; money
received as grants, gifts or donations, which is
for a purpose specified by the donor; money that
is collected for another government; and money
received for pension contributions by employees
and pension fund earnings, reserve transfers, or
go on from there to talk about what should be done
with any surpluses, how to define who gets how
much of a refund and the political obstacles such
a limit faces in the state.
The biggest of these is what to do if the
legislature wants to increase the spending limit:
final important element of a Virginia TEL would
require the state legislature to ask for
approval from voters to raise the spending
limit. Allowing legislators to overturn the
limit, even by a supermajority vote—such as
two-thirds of both legislative houses, as some
states allow—would weaken the limit. If there
is one thing that most legislatures across the
nation have proven, it is that there exists a
broad bipartisan consensus in favor of big
government. Getting a supermajority for the
destruction of a spending cap is too easy.
Voters must be consulted when government wants
to undertake expensive new duties: they must be
the ones who make the ultimate decision about
whether to raise the spending cap or not.
those pesky voters. They can’t be trusted to
increase spending, can they? That depends. When a
matter is convoluted and the benefits ill-defined,
as they were in the regional tax referenda of
2002, voters will tend to vote “no.”
But when things are clearer, and the
benefits more concrete, as they have been with the
various bond referenda for school and university
construction, park maintenance and more, they tend
to vote “yes.”
it all comes down the sales pitch. If the state
needs more police officers, school teachers and
its buildings need new roofs, then people are
probably likely to agree.
If the need is for more roads, or a new
pre-k program, then the sale will be more
difficult (particularly for the current crop of
are not reluctant to be taxed more, or to have the
state spend more, if they perceive that their
money is being used wisely.
And that’s the rub: Virginia’s political class –- Republican and Democrat
alike -- has done little to earn taxpayer trust on
taxes or spending in the last dozen years.
Republicans mouth their support for low
taxes and less spending, but have voted for huge
increases in each. Democrats say they want
government to be fiscally responsible, but
routinely back even more spending and greater
taxes than Republicans.
a one-way street that dead ends in a brick wall.
A TEL would prevent the inevitable crash.
August 25, 2008