The Budget Debate Framed: Spending Cuts, No Tax Increases

Gov. Timothy M. Kaine didn’t offer much new data in his presentation Monday to Virginia’s House and Senate money committees about Virginia’s deteriorating fiscal picture, but he did have one thing to say that will shape how the budget debate unfolds: He won’t ask to increase any General Fund taxes.

“We will continue to manage through the national economic decline without increasing the general-fund tax burden on Virginia residents,” Kaine said, as quoted by the Times-Dispatch.

Kaine’s unwillingness to try raising General Fund taxes comes in marked contrast to his effort, defeated earlier this summer, to jack up taxes to pay for transportation projects. As a consequence, the debate over how to respond to a revenue shortfall that could exceed $1 billion in the current, two-year budget, will be framed around which programs to cut. Kaine offered few specifics, but did say that programs spared in previous cost-cutting rounds, such as K-12 education, may not escape unscathed.

The two-year budget passed earlier this year included 2.2 percent increase in General Fund spending for fiscal 2009 and another 6.8 percent increase in fiscal 2010. But revenues are falling short of even those modest expectations for this year, and there is little optimism that 2009 will shape up much better.

Republicans are engaging in a round of “I told you so.” Republicans did indeed warn earlier this year that revenues were slowing and that Kaine’s attempt to create new spending programs, such as the pre-school initiative, were ill advised. But that line of logic will take them only so far. After raising a much-justified ruckus early in the year, they did not dispute updated economic forecasts made in February, and they passed Kaine’s revised budget.

Of greater interest to me is the analysis of House Appropriations Committee Chairman Lacey E. Putney, I-Bedford, who framed today’s fiscal crisis in the context of the budgetary debate that has raged since the last economic downturn:

“In 2004, then-Gov. [Mark R.] Warner stated that the tax increase approved by the General Assembly would align our longer-term revenue and spending requirements. Clearly, this did not work. The fact that state spending continues to grow faster than revenue growth is not indicative of the need for more revenue, rather the need for spending reform.”

I quite agree: The immediate problem is a revenue shortfall resulting from an economic slowdown (or outright recession), but long-term the problem has been increases in state spending that have significantly outpaced growth in inflation and population.

Virginia Democrats seem to be resigned to an ever-expanding state budget. Republicans, to their credit, are not. But the Elephant Clan has yet to (a) say which core services they are willing to cut, (b) outline strategies for delivering those services more efficiently, or (c) articulate market-based alternatives to government programs.

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6 responses to “The Budget Debate Framed: Spending Cuts, No Tax Increases”

  1. Anonymous Avatar

    Republicans need to prove they are more than the party of NO

    They need to become the party of HOW


  2. charlie Avatar

    I didn’t see a mention of whether transport would be part of the additional $1 billion.

    Given that Kaine’s plan for transport was largely dependent on the grantor tax — which depends on house sales — which are down — it just goes to show what a doufuss he is.

  3. Anonymous Avatar

    There is no reason to assume that state spending requirements are limited by inflation plus population.


  4. Anonymous Avatar

    Mark Warner went around the state with charts showing trended taxes and spending before and after a tax increase. While the final tax package was different from what Warner wanted, it still could be trended.

    I'd like to see both the trends and the actuals. And then start asking questions.

    Our Governors and most legislators remind me of the old song from the musical Oklahoma "I'm Just a Girl (or now Guy) Who Can't Say No." Any lobbyist who comes hat in hand trying to get a new or increased appropriation gets treated well by our elected officials.

    What's even worse is most of the big beggars have become profit-seeking businesses.

    I want to build a power plant — give me a financial guarantee. I need a road or rail line near my property. I'm in the health care business & need higher reimbursements, etc.

    Take tax dollars and become regulated! No pay for any officer that exceeds twice the pay given to the Governor.


  5. Groveton Avatar

    TMT says, “Take tax dollars and become regulated! No pay for any officer that exceeds twice the pay given to the Governor.”.

    I say, “Right On!”. If you want to act like a government agency then your executives can get paid at the GS and SES salary scale.

  6. Anonymous Avatar

    I agree with RH and state again my request for someone to show me valid research that proves a strong statistical relationship between state spending and population and inflation. This is a myth that has been kept alive by the Americans for [my not yours] Prosperity and their ilk. Instead of hiding behind some hocus-pocus, just come out and say that they want government to shrink so small that it is ineffective except when it comes to protecting them and no one else.

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