Bacon's Rebellion

The Structural Budget Surplus, Part II

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by

James A. Bacon
in

Michael Hardy reports in today’s Richmond Times-Dispatch that the state’s “rainy-day fund” is rapidly filling up. Writes Hardy: “Exected big deposits into the fund — it’s expected to hold about $670 million now — would push its total to an all-time high, according to a new analysis by the staff of the House budget panel.”

With the budget surplus expected to amount to $500 million or more this year, an extra $300 million to $400 million would be earmarked for the fund. However, the state Constitution caps the fund at 10 percent of the average tax collections of the past three years, or roughly $1 billion. Once the rainy day fund is full, writes Hardy, “the extra dollars could then be used to finance core state services from education to law enforcement.”

Or rebated to taxpayers for the 2004 tax increase that we never needed. With the rainy-day fund nearly full, there’s more reason than ever to roll back taxes.

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  1. Anonymous Avatar
    Anonymous

    The rainy day fund full, extra money to be spent on funding core services, gee what a crisis. The utter irresonsibility of the Warner administration should guarentee a Kilgore victory in November. But not to worry, give Jerry and his friends of few years in Richmond and this surplus crisis is going to be a distant memory..book it!

  2. Anonymous Avatar
    Anonymous

    What? Give the taxpayers their own money back? That’ll be the day!

  3. Paul Avatar
    Paul

    I would give “Jerry and his friends” 1-2 years and we’ll be dealing with another budget crisis.

    Unless they cook the book effectively. Then the next governor will deal with it.

  4. Will Vehrs Avatar
    Will Vehrs

    While I might depart a bit from limited government orthodoxy in believing that returning this surplus to taxpayers might not be the best course, I’m amused at all the Nostradamuses who claim Kilgore will fritter it away.

    At least they’re conceding Kilgore will win.

    I think both Virgninia and a lot of other states learned from the experience of the go-go late 90’s. Gilmore and the General Assembly didn’t act any differently than scores of other states. In their defense, things looked so good that some claimed we had finally eliminated the business cycle.

    Oops.

    Now we hopefully know better. I say this is the time to live within our means at the tax level we have. I certainly don’t think Jerry Kilgore is less apt to run a tight ship than Kaine. We have to remember both are trying to get elected and both will overpromise.

    I’d rather go with a guy I trust more to not raise taxes, but that’s just me.

  5. SDH Avatar
    SDH

    Let’s put this in some historical context. During the first year of the Gilmore administration, in the FY he shared with Allen, the GF unreserved balanced topped out at 11 percent of total revenues, and continued for three years at 10 percent or better. Four years later, as Gilmore left and Warner came in, the cushion was less than one percent. I’ve sent Bacon a chart I hope he posts, borrowed from my September 2004 column. The unreserved balance for this last FY will have to hit about $1.25 billion to equal that level of “surplus.” I don’t think either Allen’s or Gilmore’s fiscal gurus were skewed for their poor forecasts, as Bennett has been. It is a far better thing to have the news Warner is about to announce, and far better for the next governor, whoever that is. He is to be commended. If the GA wants to tinker a bit with more tax relief, that’s okay too — just don’t make riduculous promises that everybody with a lick of sense knows you can’t keep (such as “no car tax.”)

  6. Anonymous Avatar
    Anonymous

    Ok, Ok, I’ll admit it, Kilgore’s accent scares the hell out of this urban dwelling moderate!

  7. Anonymous Avatar
    Anonymous

    Anon. 10:14, I’m still trying to figure out what you mean by “fical” responsibility. Does the typo involve a missing “s” or “e”?

    All joking aside, I hardly call the kinds of spending increases Warner has pushed and approved “responsible”. We also have no idea how well our money is actually being spent. There is no accountability. Once thing I have become convinced of is you can’t trust the people in Richmond to have any restraint where handling the people’s money is concerned. That’s why to me the only solution is a constitutional amendment limiting tax and spending increases to a certain maximum percentage per year. Anything beyond that percentage must be agreed to by a super-majority of the legislature for emergency situations only. Without a limit, there will not be any kind of controls on spending, I don’t care who is in office.

    Also, for someone to say “It is a far better thing to have the news Warner is about to announce…” about the surplus to me is to miss the whole point. It’s the same thing as saying “Wow, I got a great tax refund this year!” when you’ve allowed the government to with-hold too much of your income in taxes. Such a wonderful thing when our government is flush with greenbacks! If Richmond is not restrained, we will all eventually find ourselves taxed at excessive rates like those in the People’s Republic of Maryland.

  8. Jim Bacon Avatar
    Jim Bacon

    The chart that SDH (Steve Haner) refers to above can be seen in his September 2004 column.

  9. Ray Hyde Avatar
    Ray Hyde

    Anybody want to comment on how much of that surplus was caused by new construction? Fauquier county just reported $2.6 million in unexpected reenues related to construction fees.

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