Bacon's Rebellion

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Citizens rarely get a chance to testify before the General Assembly budget committees. But a harmonic convergence of blogs with the new transparency in state budget reporting creates extraordinary opportunities. Now you can poke, prod and dissect the Fiscal 2007/2008 budget and tell the world what you think.

Bacon’s Rebellion will establish a thread for each of the secretariats, plus the groupings of independent and nonstate agencies, then link to the very reader-friendly summaries of each, and invite readers to comment.

Is the state spending too much? Too little? Spending it in the wrong place? Are we squandering funds on useless programs? Are we failing to invest in the future? Let us know.

Christina Nuckols with the Virginian-Pilot is normally a careful reporter but she committed a major gaffe in her coverage of the fourth and final meeting of the Statewide Transportation Analysis and Recommendation Task Force (START), creating the impression that there is more sentiment for a state wide tax increase for transportation than, in fact, there is.

In the Dec. 17, 2005, edition of the Virginian-Pilot, Nuckols wrote:

RICHMOND — A task force of state senators, business leaders and transportation experts agreed Friday that the state needs to increase spending on roads and transit projects by $1 billion a year.

However, the group wrapped up its final meeting without endorsing a specific plan for raising those dollars or reaching agreement on how to spend the money.

Our reporter Bob Burke, who covered the START hearing for the Road to Ruin attended the entire meeting and says that no agreement was reached to raise $1 billion — or any amount for that matter. Earlier today, Burke checked with Neil Menkes with the Senate Finance Committee to make sure he hadn’t overlooked something. Menkes confirmed that the topic was barely discussed and certainly generated no accord on an amount to be raised. A task force hand-out did mention a $1 billion figure as a starting point for debate, Menks said. But task force Chair Charles R. Hawkins, R-Pittsylvania, specifically noted towards the close of the meeting that he would remove the figure from the panel’s final, written product.

Contrary to the impression created by the Virginian-Pilot story, support for a major transportation tax increase in 2006 is collapsing. Although it remains possible that members of the state Senate could submit a bill to raise taxes, the task force appointed to study the subject — and, most likely, the Senate itself — remains divided. The House of Delegates leadership has vowed to oppose any tax increase, and even Gov.-elect Tim Kaine has said he would refuse to support a transportation-related tax hike until a constitutional amendment were passed to protect the transportation trust fund.

Commendable improvements in budget documents have made over the years, making them easier to understand. If you check the 2006 proposed budget, a citizen can review, in detail, the spending plans by secretariat.

The budget includes information about the objectives, customers, and performance of each agency under a secretariat. Increased or new spending is justified.

This new transparency is wonderful, but it is of little use unless citizens look it over with an open mind, evaluating if agencies are really providing appropriate services and if their performance measures are valid and substantive. I would encourage those with some interest or knowledge in a certain area–social services, natural resources, or economic development, for example–take a little time to look over some of the budget documentation in those areas. If no one questions what agencies present, the agencies will inevitably make this budget document a meaningless exercise by rote.

One thing I’ve noticed as I’ve perused a few of the agency materials: “taxpayers” aren’t much of a customer or “stakeholder” for some agencies. I’d argue that the first objective of any agency should be providing value to the taxpayers.

I tuned into the WCVE-TV program Perspectives today, seeking some forward looking Virginia punditry. Barbara Berlin’s guest would be Professor Stephen Farnsworth of the University of Mary Washington, discussing “What to expect from the upcoming Kaine administration and the battles the new democratic governor will face with the Republican-controlled legislature.”

Unfortunately, Berlin didn’t deliver as advertised. She spent 90% of the time asking Farnsworth questions about the “whys” of the November election results. Farnsworth gave a solid presentation of the now accepted conventional wisdom that is more than familiar to anyone who even casually reads blogs or follows politics.

In the waning moments of the interview, Berlin finally asked Farnsworth about the upcoming General Assembly session, but with the lead question, “Is Kaine too liberal?” Farnsworth couldn’t do too much with that, pointing out the obvious: “We’ll have to see what Kaine proposes.”

Remember that you heard it on “Perspectives” first: Kaine will cultivate an alliance with the more moderate Senate, but will have “rougher sledding” with the House of Delegates. The House will be “skeptical and suspicious, not inclined to cooperate.”

I hate to rag on Barbara Berlin, but she didn’t deliver the promised program. What good are pundits if we can’t make them to go on record with some predictions? Guess we’ll all just wait “to see what Kaine proposes.”

13.7 percent.

That’s how much state spending will grow under Gov. Mark R. Warner’s proposed Fiscal 2007-2008 budget over the current budget. Even with inflation warming up, that’s a rapid expansion. But only one reporter who covered the Governor’s presentation noted the fact. Kudos to Warren Fiske with the Virginian-Pilot, for picking up on it.

That number did not appear in the Governor’s speech. Fiske had to track down the number himself. No other newspaper — not the The Washington Post, the Richmond Times-Dispatch, the Associated Press, the (Newport News) Daily News or the (Fredericksburg) Free Lance-Star — included the figure in its coverage of the governor’s speech. Apparently, the continued ballooning of the state budget is a non-story.

Even Fiske did not stack up the Governor’s rhetoric of fiscal conservatism against the spending history during his entire four-year tenure, his claims of having addressed a “$6 billion budget shortfall,” or the chronic surpluses that have cropped up since the 2004 tax hike. No, those bold speakers of truth to power in the Virginia press corps presented the Warner budget story largely as the Governor spoon fed it to them.

Nothing in the Governor’s speech or in any of the articles written about it would allow readers to calculate even the broadest of trends in state revenues. For that, you have to visit Bacon’s Rebellion. Here are the General Fund numbers derived from historical documents posted on the Secretary of Finance website:

Fiscal 2001…….. $11,798 million……………. Gilmore
Fiscal 2002…….. 11,406 million (-3.3%)…….. Gilmore/Warner
Fiscal 2003…….. 11,910 million (+4.4%)…….. Warner
Fiscal 2004…….. 12,931 million (+8.6%)…….. Warner
Fiscal 2005…….. 14,427 million (+11.6%)…… Warner
Fiscal 2006…….. 15,355 million (+6.4%)…….. Warner/Kaine (est.)
Fiscal 2007……… 16,141 million (+5.1%)……. Kaine (proposed)
Fiscal 2008……… 16,996 million (+5.3%)……. Kaine (proposed)

(Note: These basic numbers do not exist on one Web page. I have pulled them from several different documents found on the Secretary of Finance’s website. I believe I’m comparing apples to apples, but I’m not totally certain that I am. If someone has more authoritative numbers, please correct me.)

Analysis: Over the five-year period extending from Gov. Gilmore’s last full fiscal year in office to the current fiscal year — a period that includes the recession and Warner’s painful budget cutting in fiscal 2002 — General Fund revenues have surged 30.1 percent. Inflation has amounted to about 12 percent over the same period. Bottom line: Even including a painful recession and discounting for inflation, state government revenues/spending has increased 18 percent over five years. (If you want to choose the four-year time frame of Warner’s tenure, then the spending increase is even bigger.)

Reporters in the Richmond press corps need not accept my analysis, but surely they could have made at least a minimal effort to put Gov. Warner’s budget presentation in a long-term perspective. After all, Warner is running an undeclared candidacy for president largely on his record of fiscal probity. For reporters to simply recite a laundry list of spending proposals is unforgivably lazy.

Gov. Mark R. Warner has submitted a $74 billion state budget for fiscal 2007 and 2008 — a $10 billion increase over the current biennial budget. There is a range of good, bad and ugly in his proposals. In this post, I shall address the positive.

“In this budget,” the Governor declared in presenting it to the General Assembly, “we will not make spending or tax policy commitments whose cost will show up or escalate in the out years. We will not start major new programs. And, we will not casually assume that Virginia’s revenues will continue to show extra-ordinary growth for the next two and a half years.”

That sums up the spirit of the budget proposal pretty well. Warner has hewed to the path of fiscal righteousness in refraining from launching expensive new programs. He’s poured tons of money into existing programs, as I shall detail in a follow-up post, but he hasn’t set up any significant new cost centers that will impose an ongoing drain on state finances. Given the temptations posed by record revenues gushing into the state Treasury, the Governor is to be commended for his self control.

Instead of spending the money on ongoing programs, he’s using $1.5 billion in excess cash largely for one-time capital investments that are, as he describes them, either (a) “urgently needed,” or (b) “smart investments in economic growth, or a better quality of life for Virginians.”

Given the fact that Warner is intent upon spending the money, his selection of priorities is reasonable. He is investing in knowledge creation with his R&D initiative, restructuring mental health programs to make them more effective, accelerating investment in Chesapeake Bay clean up, and supporting various transportation projects. We can all quibble with the list — I think he could have spent less on transportation, for instance, and dedicated more to accelerate deployment of broadband outside Virginia’s major metro areas — but the money, for the most part, goes to purposes that enjoy broad support.

Finally, the Governor is showing fiscal restraint by making conservative revenue assumptions. His budget projects revenue growth of 6.1 percent for the current fiscal year (2006), 6.0 percent for fiscal 2007, and 5.3 percent for fiscal 2008. That’s very conservative — far below the rate of revenue growth of the past few years. It’s better to aim low and wind up with a surplus than to aim high and wind up cutting.