An Era of Spending Restraint? Really?

Virginia state spending, FY 2006-2015, adjusted for inflation and population growth. Source: Joint Legislative Audit and Review Commission
Virginia state spending, FY 2006-2015, adjusted for inflation and population growth. Source: Joint Legislative Audit and Review Commission

by James A. Bacon

After a decade of severe recession, sequestration and sub-par economic growth, Virginia state spending still increased 15% overall when adjusted for inflation and population growth. The spending increase occurred in the Non-General Fund, more than offsetting the squeeze in the discretionary General Fund, according to data published recently in the “State Spending: 2015 Update” report to the General Assembly.

When it comes to judging spending growth over time, raw numbers do not give a complete picture. To maintain a constant level of services (and assuming no gains in productivity), spending must increase to reflect inflation and population growth. Over the 10-year period in question, inflation amounted to 17.6% and population growth 8.9%. Even accounting for those two factors, Virginia state spending increased during a period of what has been widely perceived as a time of budget austerity.

General Funding spending has, in fact, been reined in. The 5% decline in total spending is all the more remarkable considering that the General Fund had to absorb a 75% increase, amounting to $3.7 billion, in Medicaid spending, leaving  less for other programs.

By contrast, Non-General Fund spending has soared, reflecting federal contributions to Medicaid, tuition & fee hikes at public universities and tax increases yielding new funds for road, highway and public transit construction.

Aside from Medicaid, over which the state has limited control, Higher Ed has been the big winner, as can seen in this chart (numbers not adjusted for inflation):


Remember, inflation over this period was 17.6%. Many higher ed institutions also expanded enrollment, which also drove up costs. But spending far outpaced inflation and enrollment increases combined at most institutions.

Losers (by secretarial area) included Commerce & Trade, Agriculture & Forestry, and Natural Resources. State assistance to K-12 education increased 18% — enough to keep up with inflation, but not enough to keep up with increased enrollments.

(Hat tip: Jim Weigand)

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7 responses to “An Era of Spending Restraint? Really?”

  1. LarrytheG Avatar

    I think the blog title is a little misleading and further promotes budget and spending illiteracy….

    The title implies that restraint is not being exercised by the state.

    that wrong impression continues with this:

    ” General Funding spending has, in fact, been reined in….considering that the General Fund had to absorb a 75% increase, amounting to $3.7 billion, in Medicaid spending….”

    By contrast, Non-General Fund spending has soared, reflecting federal contributions to Medicaid….

    Aside from Medicaid, over which the state has limited control”

    So is Virginia not showing restraint in the budget when it COULD or is it really true that Virginia has “limited control” in the spending?

    well for one thing – when people lose their jobs they lose their insurance and then they become eligible for MedicAid and that’s WHY MedicAid enrollment goes UP – and thus causes increases in spending.

    Next – MedicAid is a VOLUNTARY program. Virginia is free to do something different – including not covering poor people or covering far fewer with far less benefits. we DO have that option.

    So perhaps this blog post is an opportunity to explain much better how MedicAid really works and how that, in turn, does affect the budget in Virginia because MedicAid is such a cost driver in the budget – second only to education.

    Va does have choices even WITH MedicAid. For instance, it has chosen to not provide health care to able bodied adults without kids while at the same time making MedicAid money available to people who own homes but need long term nursing home care when they could choose to not do that.

    When we, as citizens and taxpayers, want to hold opinions as to the effect of MedicAid in the State budget and favor or oppose actions by the State and elected officials with regard to MedicAid – we owe it to ourselves to know the facts and base our views on those facts.

    I would assert that the ways that we currently assess our involvement in MedicAid is based more on ignorance than facts and that, in turn, drives opinion – not based on the facts.

    here’s a good start at becoming more informed:

    is not really based on much of an in-depth understanding of MedicAid, how it works in general and how Virginia has chosen to implement it.

  2. Hill City Jim Avatar
    Hill City Jim

    Your biggest problem is following the Commonwealth Institute. You need to start reading the Heritage Foundation studies.

  3. LarrytheG Avatar

    nope. The Commonwealth Institute is providing FACTS specifically relevant to MedicAid in Va – something the Heritage folks are not providing.

    The bigger problem here is folks that suck up Heritage and related propaganda and misinformation and then look at the Va budget and it’s MedicAid program through that lens.

    Let’s deal with the facts about MedicAid in Va –

    The reality is – that we do not have to participate in MedicAid at all.

    we could choose to not provide health care to the poor, disabled or elderly if that’s what we really wanted … or to cut it way back to what we think we can afford. I’m fine with that as long as we make that decision – as an informed choice.

    but what we ought not do – is allow ideological-driven disinformation to masquerade as facts.

    if one wants to provide other fact-based data specific to Va on MedicAid – I WELCOME IT.

    The simple truth is that Va has choices about how to deal with the poor, disabled and elderly – and they make them – but then they evade responsibility for those choices by trying to blame others.

  4. Steve Haner Avatar
    Steve Haner

    To the extent that the General Fund (GF) represents what you really think of as “government” – the bureaucrats, lawyers, regulators, legislators, police and courts – then the drop in the cost of “government” has been phenomenal. As noted, if you disregard the state GF share of Medicaid, which has almost doubled in twenty years, the cost of “government” is way down. That may or may not always be a good thing. The state pay scale is not competitive and with near full employment it is going to have to raise salaries generally to attract new workers.

    To the extent that the Non-General Fund (NGF) is mainly for various “services”, and most especially health care, then the same forces driving massive inflation in the private sector come to play in the public sector. Transportation is a NGF “service” that depends mainly on user fees and its not getting any cheaper to build or maintain highways. Higher Ed is a service and people pay tuitions for it, and that growth at the colleges Jim noted is mainly because the schools have been allowed/encouraged/incented to test the market ceiling on tuition. At the same time on the GF side the support for the schools has eroded.

    Larry is right that Virginia has some choices in Medicaid but it mainly has taken the lower cost choice when it could, and the cost of the service is still running far ahead of inflation. Just like with everybody else’s premiums, deductibles and copays. Up up up.

  5. Hill City Jim Avatar
    Hill City Jim

    In 4 easy lines…10 year increases
    Inflation +17.6%
    Personal Income +32%
    Total operating Budget +47%
    Higher Ed Agencies +66%

    I encourage you to go to the report and read the last chart, Higher Ed enrollments and Tuition increases.

    1. LarrytheG Avatar

      what are we to deduce about the status of state finances when looking at the non-general fund money for higher ed ?

      are the tuitions considered state revenues but in reality are just pass through and have no real import as to the state budget and spending?

  6. LarrytheG Avatar

    Virginia, has chosen to have MedicAid pay for long term nursing care for people who own their homes when other states have not done that.

    the point about MedicAid is that the States do have a lot of latitude in what they choose to pay for or not – and MedicAid is mightily affected by the economy in general as well as the new gig economy where people who work full time – cannot get health care – the state ends up with those costs.

    If you listen to the budget hawks – they will point out how MedicAid is “out of control” – but they themselves will not suggest where to make the cuts –

    it’s EASY to say that MedicAid spending is out of control. Any fool can do that.

    It’s much harder to actual deal with the reasons why it is or to have the spine to step up and advocate what to cut.

    so we have what I call – budget hawk cowards.

    folks who decry the “entitlements” but have no words for what to actually do about it – and that very much includes the elected.

    My view – if you’re serious about it – walk the walk.. Have the courage to lay down the cuts.. advocate for them – and vote that way.

    and let the voters decide if they agree.

    otherwise all we are doing is one non-stop demonization .. totally lacking in courage of conviction.

    I do have my view but I also do abide by the vote.

    but hypocrisy is the enemy of real government.

    we argue-we demonize – then we do nothing.

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