Bacon's Rebellion

Warner’s Last Budget: The Good…

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James A. Bacon
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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.

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2 responses to “Warner’s Last Budget: The Good…”

  1. Anonymous Avatar
    Anonymous

    Let me get this staight, Jim — you think he should have spent LESS of the GF on transportation? I don’t have the hard numbers right here, but he directed about $625 million over two years — and almost half of that was from a source (the tax on insurance premiums) that the previous budget had already dedicated to transportation. Counting it again is hardly unprecdedented, of course, and its slightly better than what was everybody was doing last year — claiming credit for the basic federal funding growth as if they had something to do with its appearance.

    That leaves about $340 million new money over two years — with which he did something very wise — use it to match all those annoying federal earmarks. By doing that he enhanced the prospect those projects will actually get done (many are not pork) and guaranteed the Governor Kaine and the local legislators will be able to help cut the ribbons along with the congressperson! It also minimized disruption of the existing state plans.

    Putting some of the GF surplus into transportation was a political necessity. I doubt that number will go down as the budget moves forward, and I’m sure many in the legislature want it to go up much more. (They are not in the usual uncomfortable position of having to cut some popular item to get there — but that’s not unprecedented either. In budget poker the Governor gets the first deal,he gets to deal the cards he wants, and they come out face up.

    What would a nice private sector advocate like you propose the state do to increase the expansion of broadband? Isn’t the market doing fine on its own? With the price dropping like a rock in these built out areas and everybody mailing me new offers that’s not a sign the private sector is failing.

  2. Will Vehrs Avatar
    Will Vehrs

    Jim, I would agree with you that this is the “good” in the budget and Gov. Warner has largely stayed true to his image as a stalwart steward of state finances. I commend him and hope that his brand of Democratic governance gets a chance to prove itself nationally.

    The ultimate question is whether Gov-elect Kaine will be able to continue this approach. Will pressure for new programs/new spending overwhelm him? Will Democrats (or free spending Republicans) allow him to move only incrementally, as excess revenues allow?

    Was the Warner era just a “fix,” or was it the start of a continuing approach?

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