|
It’s a pleasure to be with you today.
I consider this a real opportunity.
The collective brainpower in this room
knows no bounds, and it’s a privilege to
stand before you to offer my thoughts about Virginia’s
future.
I plan to be very candid in my assessment
of where we are, and hope that you will
likewise be forthcoming with your views about
how business leaders can help forge the
direction for our future.
There has never been a time when
Virginia
was more in need of active participation from
its business leaders in the governing process.
Why
is that the case? Because the business
community understands the need to look down
the road – to make strategic decisions today
that will deliver tomorrow’s goals.
You
know that at key points in the business cycle,
investments have to be made in order to
produce the results that your stockholders
will demand in the future.
Unfortunately,
the political environment is not conducive to
that type of thinking. Those of us in the
political world want immediate gratification
– that usually means re-election.
With
a very short election cycle, it’s hard to
find the courage that’s needed for long-term
thinking.
That’s
why we need help from the business community
in setting the direction. There’s no
group that carries more weight than proven
business leaders.
And,
in my view, the time to make strategic
decisions is when you’re coming out of an
economic downturn.
As
you well know, when the economy tanks,
priorities rise to the surface. Businessmen
look to the bottom line and make the hard
choices. The public sector follows a similar
process, weighing what it can and cannot live
without.
And,
as would be expected, the end result is a de
facto statement of our highest priorities.
Having dealt with a $6.0 billion budget
problem over a three-year period, suffice it
to say that the Commonwealth has
“prioritized away” all but the core
functions. In addition, we have used some
one-time measures to weather the economic
storm.
As a result, the Commonwealth stands leaner and with
less flexibility than it has enjoyed in the
past. Why
less flexibility?
Because much of the extra revenue that
was collected during the “bubble years”
went for things that can’t easily be
retracted.
Much of the money was spent to regain ground lost
during the last recession and to achieve goals
that we thought were important, such as
lowering class size in our public schools,
reducing the cost of a college education, and
providing about $1.5 billion in tax relief to
our citizens, with the largest single measure
being car tax relief.
And so, when the economy started to slide, we
“paid” for those decisions by having to
look elsewhere in the budget.
It goes without saying that no one
wants to cut public education.
No one wants to take back tax relief.
No one wanted to return to rising
college tuition, but in fact, that is one of
the areas where we had to backslide.
The recession left us with no choice.
And now we stand as a leaner
organization – poised for the future, with a
budget that is highly concentrated in core
functions. Three
quarters of our general fund budget rests in
education, Medicaid (which provides health and
nursing home care to the poor and elderly),
and public safety.
The remaining quarter of our budget is
spread across a host of services – from a
court system to environmental protection to
economic development.
As we move forward, the first thing we have to do is
make certain future revenue growth is
channeled into our highest priorities
– those basic core services, rather
than being diverted into “sideshows.”
I’m hopeful that this effort will be aided by work
of the Council on Virginia’s
Future, which I am privileged to sit on with
business leaders like Dubby Wynne, Heywood
Fralin, and others.
Part of our effort will be to look at
where service demands will come from in the
future and make certain we have a way to
measure the success of our response to those
demands.
That is an essential component of our long-range
planning. But,
it is not the only component.
Just as we have an obligation to make
sure every dollar that comes into the state
treasury goes for essential services, we also
have an obligation to weigh expected demands
against expected capacity.
The people elected us to make informed judgments on
their behalf. It’s
easy to tell people what they want to hear –
it’s sometimes difficult to tell people what
they need to know.
Everything revolves around choices.
If the questions are framed properly
and choices flow from those questions, we get
direction. If
the questions aren’t properly framed, we
don’t. It’s
that simple.
Perhaps that’s why I get so frustrated when
I hear my colleagues say:
“No
one is coming up to me on the street
and saying they’re under taxed!”
Of
course they’re not.
No
one in Stafford
County is telling me that we need to renovate a
dilapidated fire hazard in Capitol
Square
– but we do.
No
one is telling me we should replace our
antiquated, inadequate telecommunications
system for our State Police –
but we should.
No
one is telling me that our courts are
overcrowded and understaffed – but they are.
I dare say the president of Ford Motor Company also
doesn’t have customers coming up to him on
the street saying Crown Victorias are too
cheap and the price should be raised.
Let’s get real –
If we notice a crack in the dike, we don’t cop-out
by studying how high the water might
get if it breaks.
We don’t form a commission to
ascertain whose property downstream will get
damaged if it breaks.
Instead, we spend the dollars to fix
the dike!
What I’m trying to say is that our obligation as
policymakers is to see where there is a
problem – to think beyond our current term
of office – to look down the road and frame
the questions in a way that our citizens know
the real choices that we are weighing.
To do less is to deceive those who put
their trust in us.
As I look at the landscape, I see several things –
some that have already played out and others
that will play out in the not so distant
future.
I see a state that has promised car tax relief and
food tax relief but has been unable to fully
deliver on either because of the cost;
I see numerous reports that say our present tax
system is outdated and full of inequities;
I see recommendations from a legislative watchdog
agency and the Board of Education saying the
state should be paying a larger part of the
public education cost.
Obviously, this would take pressure off
local property taxes;
I see a legislative study that concluded higher
education is being under funded by several
hundred million dollars, and the logical
conclusion is that access, quality, or
affordability has to suffer;
I see and hear about a transportation system that is
losing ground every year;
I see demographics that tell me our population 65
and older will grow 28 percent over this
decade. Our
public education enrollment will grow
modestly, but the number of special education
kids who cost twice as much to educate will
grow faster. And
college enrollment now seems to be on a
steeper up-tick than previously thought.
These are all things that will require innovative
thinking or extraordinary effort to confront.
I don’t want to paint a negative picture.
Clearly, we are very fortunate in the
Commonwealth. Virginia’s
economy is diversified and vibrant.
Once we fully emerge from the
recession, we can expect revenue growth in the
five to six percent range each year.
That will take care of commitments such as bringing
public education SOQ costs up-to-date every
two years, covering double-digit increases in
Medicaid health care and nursing home costs,
and keeping our growing prison population
behind bars.
But, since these are areas that grow faster than the rate of
inflation and faster than our overall revenue
growth, we must continually allocate most of
our new revenue to these areas, leaving other
areas of responsibility to slowly starve over
time.
For example, we never have sufficient
revenue to work down the huge backlog of
deferred maintenance at our colleges and other
state-owned buildings.
Cases get stacked up in our court system
because we can’t add staff to work down the
caseload.
We often go for years without a solid pay
raise for our state employees.
We can’t deal with issues like
retention of our state police.
We virtually never fund enrollment
increases in higher education any more but
require colleges to “eat the cost.”
That generally finds its way into
higher tuition or fees.
I could go on ... but what I’m
really saying is that I fear the stealth
damage we're doing to our infrastructure
by letting these things go dormant -- damage
that we won't see today, or a year form now,
but that we will see some five to 10 years
down the road."
If we want to do more than “run in place”, if we
want to address any of the extraordinary
issues that I noted earlier, then we need to
step up to the plate and explain to the people
of Virginia just what the problems and choices
are.
We had an open debate with the citizens of
Virginia
last fall, and the message was somewhat mixed.
The overwhelming support enjoyed by the
General Obligation Bonds tells me the people
of Virginia
do care about our Commonwealth, and
they are willing to invest in its future.
But, the people also sent us back to the drawing
board for a way to address our transportation
needs.
Now, there are a myriad of possible meanings in what
was said in two regions of our state regarding
transportation.
Some like to say the people were
sending a simple message – “no new
taxes.”
On the other hand, the message could have been, “I
want a statewide solution rather than a
regional solution, because I’m afraid my
tax dollars will be used to fix problems in
other areas of the state.”
It might have meant the citizens think we should try
different approaches to solving the problem,
like making new subdivision roads the
responsibility of the county or neighborhood
instead of taking them into the state system.
It isn’t clear what the citizens were saying, but
I’m quite certain that two startling
statistics have not registered with either our
citizens or our policymakers.
The first is that 13 percent of our highway
revenues are needed to service debt.
That compares with the self-imposed
limit of five percent that we feel is prudent
on the general fund side.
Second, more and more money is being siphoned out of
construction every year for road maintenance.
In 1986, when the General Assembly last
looked at transportation finance in a
comprehensive fashion, more of our
transportation dollars were being spent on
construction than maintenance. Today, there is
a stark reversal and $1.85 will be spent on
maintenance for every $1 spent on
construction. That
means that over the next six years, more than
$400 million will be diverted from
construction to maintenance.
It means that in FY 2009, VDOT is projecting that
$168 million less will be available for
interstate, primary, secondary and urban
construction than is available in the current
fiscal year, because maintenance costs will
continue to take a larger share of the pot.
And so, while signals from our citizens may be
somewhat mixed on the transportation front, we
can’t let that scare us away from asking the
questions that need to be asked.
You tell me what is needed in the area of
transportation . . . I think I know.
But, as legislators, we can’t divine the answers.
The answers must come from our
citizens, and it is only through those answers
that we can develop a plan for meeting core
services into the future.
The questions are simple:
As a Commonwealth, are we making progress?
Are we standing still?
Are we losing ground?
We can’t set the bar on the service side going
forward without an honest answer to these
questions.
Once the bar is set, we can measure our performance
against it.
And once we begin to measure, we have
to acknowledge that fiscal responsibility runs
in two directions.
Fiscal responsibility includes cutting taxes. ... It
also includes adequately funding those things
that we collectively agree are our basic core
obligations.
Please don’t misunderstand me – my
focus is on securing adequate resources to
meet our basic needs and our core
responsibilities.
I do not seek to advance popular
initiatives that stray from our core duties.
I have no illusions about our inability to be all things to
all people. While
striving to excel in each and every program is
a laudable goal, it also is a sure-fire
prescription for mediocrity.
But, there are things that we should
consider. We
should consider whether revenues can be
restructured in a way to make them fairer and
more dynamic in terms of reflecting the modern
economy.
We should consider whether our
relationship with localities needs to be
changed. Are
there things the state demands of them, yet
does not support?
Are there activities they provide that
have outlived their usefulness?
Most agree that we need to eliminate the
car tax once and for all –
and then provide equivalent dollars to
localities through a change in the state and
local tax structure.
In that way, we get the car tax – a local tax –
out of the state budget and out of our budget
debates so it does not compete with our core
obligations.
We should look at other taxes, too – the sales tax on food, the estate tax.
We need to reexamine our tax
preferences and exemptions.
And while we’re at it, we should
consider all revenue sources. Are there
opportunities to rely more on user fees and
less on general funds?
If we charge for more services, will we
get a better sense of what the people are
willing to buy?
Realistically, we can’t address these
issues overnight. But, we recently initiated the
third
tax restructuring panel in four years. If we don’t take any meaningful
action, we will lose credibility with the
people of Virginia.
I do think you will see some
recommendations from this year’s tax
commission – even if they have to emerge in
the form of a minority report.
Complacency should no longer be an option.
Being a steward of the public trust
involves thinking ahead – it involves
formulating difficult questions that need to
be asked. It
involves asking the citizens of
Virginia
what they want their government to be.
But that input from the people must be balanced with
our duties as elected officials.
If we listen to only the squeaky
wheels, we’re not doing right by each and
every one of the seven million citizens of
Virginia
who look to us for leadership.
Our task, with the input of our citizens, is to
design a package that will withstand the test
of time and carry us over future economic
hills and valleys without great disruption.
We make major structural decisions
infrequently; we need to get it right.
If we’re not willing to make the effort,
if we’re going to concede defeat before
we’ve floated the first proposal, then we
need to be honest with ourselves.
If we’re content to be a grade “C”
state, then we plug along as we are now.
If we are content to be “middle of the
road”, then we build our resource structure
accordingly.
Alternatively, if we feel we should
provide “A+ “services in a given area,
then we need to provide the resources for it.
Let’s not kid ourselves – we can’t sustain quality without continual reinvestment and
renewal. You
know it, and I know it. Before too long, the
industries we try to court and the rating
agencies we attempt to impress will see
through our facade.
We
know resources will never be limitless; we
will always need to set priorities and make
choices. But
we are way overdue to begin the conversation
about what we want
Virginia
to look like 10 or 15 years from now.
If not, my fear is that one day we will
wake and find that our foundations have been
attacked by the dry rot of inertia, denial,
and lack of courage.
*
* * * *
I was reminded recently of the motto for one of
Virginia’s
founding families. It says:
“Not
unmindful of the future.
This struck me as especially appropriate for Virginia
at this crossroads.
It tells me that we should respect our past, and
nurture what we currently do well.
But it cautions us to keep a vigilant
eye on how our actions today impact our
tomorrows. Our
choices today have consequences for the future
- some intended, some unintended.
As leaders in our communities, I ask for your help
in continuing this dialog about where we’re
going.
Specifically, if you have a view, please sit down
with the delegate and senator in your district
and share it.
As I said earlier, proven business
leaders can get the ear of legislators.
Also, I ask that you engage your colleagues in the
business community back home and members of
your civic groups and other clubs.
Talk to your neighbors.
Do anything that you can to help carry
the message that we are looking for a signal
from Virginians about what they want their Virginia
to be ten to fifteen years from now.
It is up to the elected officials to
chart the course once we know the direction.
We must ask the question.
We owe it to our children.
We owe it to the growing elderly
population, many of whom will have to turn to
the state in the years ahead.
And we owe it to ourselves as thoughtful and
compassionate citizens of the greatest state
in this nation.
Thank you for your time and interest.
--
August
11, 2003
|
