Another Stinkin’ Budget Crunch

Now comes the news that Virginia is facing a $1 billion budget shortfall in the two-year budget that commenced a month and a half ago.

Oops. How did that happen?

Let’s dial back the time machine to Jan. 31, when the Washington Post reported, “House Republican leaders warned Thursday that there may be a shortfall of as much as $1 billion in Gov. Timothy M. Kaine’s 2009-10 budget, and they demanded that he quickly revise revenue projections.”

Well, with mounting evidence of a slowing economy, Kaine did ratchet back his revenue growth forecasts, and Republicans signed on to the revised budget after pushing for a reserve fund and trimming some of the governor’s spending initiatives. But it looks like they didn’t crank down spending enough. Here we are, not two months into the fiscal ’09 budget, and we’re already in a big, steaming mess of trouble.

Along these lines, while writing a short story for R’Biz recently, I ran across an interesting statistic. The good news (for we Richmonders) was that, according to the latest Bureau of Labor Statistics data, the Richmond regional economy had experienced a net gain of 3,900 jobs over the previous 12 months. The bad news was, they were all government jobs, split fairly evenly between state and local government. That’s really bad news for the rest of the state, which is paying for those state government jobs through taxes.

Could that data be correct? I wondered. After all the angst and pain over budget cuts this spring, was the state government in Richmond still padding payroll? To be sure, I checked the state department of human resource management website, and what did I find?

Between January and June 2008, the state increased the number of non-university job rolls by 662 jobs. That doesn’t match up with the BLS numbers exactly, but it is consistent with the fact that government jobs are growing.

However, the really big jump in jobs occurred among public university employees: up more than 5,000! That’s 15 percent. That makes public higher education, not government, the real growth industry in Virginia. Of course, it’s easy to grow if you can jack up charges and fees with impunity. (See “Tuitions Gone Wild.”) Is there any way to persuade universities to restructure, re-engineer processes or otherwise find ways to boost productivity and drive down costs? Can Gov. Kaine and the General Assembly ever get a handle on increasing payroll and costs until they tame higher ed?

The governor will provide more authoritative information than the patch-work data I can glean from the Internet. We should hear more Monday on how bad the situation is and what can be done about it.

(By the way folks, I’m leaving tomorrow on another long weekend jaunt. Off to Cincinnati. I won’t be blogging again until Tuesday.)

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8 responses to “Another Stinkin’ Budget Crunch”

  1. Spank That Donkey Avatar
    Spank That Donkey

    Ever heard of Governor’s Allen and Gilmore?

    Just asking?

  2. Anonymous Avatar

    Well, Virginia seems to be in good company. At least 25 other states have budget shortfalls as large or larger than Virginia’s, as a percent of total budet.

    There must be a rampage of bad planning and bad management across the states. On that list I count 14 red states so the distribution of bad management seems to be independent of party affiliation.


  3. Anonymous Avatar

    How did that happen?

    My rule of thumb is that it costs 2% of the budget to come up with a reasonable cost estimate for a major project, reasonable being +/- 10%.

    I can imagine the howls of pain if Virginia actually tried to spend $800 million or so nailing down all its costs, but in anycase missing a moving target of 17 billion by five percent isn’t so bad if it is a random number that can hit either side of target.

    But if it is consistently over, then that’s a problem, and you can imagine what the reaction would be if they ever came in under: “Give us our money back!”

    It seems to me tha Bacon has contrived a true lose/lose argument. Unless the government hits dead on, they are subject to criticism.


  4. Interesting number but what does it really mean? Any idea how many of these positions are at the restructured schools? Or are supported through outside sponsorship or other forms of support besides the state budget that universities bring in?

  5. Groveton Avatar

    A budget crisis in late 2008. Who could have forseen that? Oh yeah – every company in every industry in the world. But not Virginia’s political leadership. Oh no. $150/gal for gas, spiking prices (including food), jobs moving offshore and never coming back, gridlock on transportation, a mortgage meltdown, a credit crisis, failing banks… Who could have guessed there would be financial problems?

  6. Anonymous Avatar

    Groveton – Here’s an easy solution that would likely get full support of the Washington Post and the Fairfax County Chamber of Commerce. Let’s increases the individual income tax (which Fairfax County pays somewhere between 26-28%), while freezing all state aid for Fairfax County for the next five years, but also requiring Fairfax County to approve the requested 220 million square feet of development for Tysons Corner.

    I probably shouldn’t be writing this, as there is a definite risk that both the WaPo and Bill Lecos might start advocating it as a solution. What is even more scary is that a 50% or more of the Fairfax County delegation to the GA would vote for it.

    On the other hand, Fairfax leaders could insist that the rest of the recommendations of the Wilder Commission be implemented. Many of those recommendations have lain dormant since Mark Warner was Governor. Must step on too many “important” toes.


  7. Anonymous Avatar
    Anonymous has a nice article on current college tuition trends and asks the question: Is college worth the price?

    …And some independent studies suggest the value is less than people think. Take a well-known 1999 paper by Princeton economist Alan Krueger and researcher Stacy Berg Dale at the Andrew W. Mellon Foundation.

    The study compared the salaries of graduates who earned degrees from top-tier colleges with those of graduates who were accepted by these schools but chose to attend less selective institutions.

    The research found that the two groups of students ended up with similar incomes. It appears that bright students excel no matter where they get their degree. The one exception: Low-income students did benefit from attending the most selective colleges – in their case, the impact of social networking seemed to pay off. “


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