Category Archives: Budgets

Budget Earmarks for Nonstate Entities

by Dick Hall-Sizemore

For many years, the most interesting and fun portion of the state Appropriation Act was a section near the end entitled, “State Grants to Nonstate Entities-Nonstate Agencies.” The 2000 Appropriation Act, appropriating almost $36 million for these nonstate entities, is a good example. It included funding for historic courthouses, local museums and historical societies, and the houses of Founding Fathers, as well as for larger, statewide museums and organizations.

Most of the amounts provided were small, especially in the context of the overall Appropriation Act. However, they were important to the local recipients and served to add to the political capital of the local legislators who sponsored the appropriations.

In 2011, Attorney General Ken Cuccinelli threw what seemed to be a monkey wrench into this process. In an official opinion, he declared that such appropriations, although they may “serve noble purposes,” were in violation of the state constitution. Article IV, Section 16, of the Virginia Constitution plainly prohibits “any appropriation of public funds, personal property, or real estate…to any charitable institution which is not owned or controlled by the Commonwealth.” For years the legislature had operated under the legal fiction that such appropriations were not to “charitable” organizations, but for “historical” or “cultural” ones. Indeed the title of the budget program used for these appropriations is “Financial Assistance for Cultural and Artistic Affairs.” The Attorney General’s opinion ended that charade. Continue reading

What Surplus? Virginia Doesn’t Allow Surpluses!

Secretary of Finance Stephen Cumming’s slide showing most of the final surge of unexpected revenue before June 30 came from payments from business owners and investors. Click for larger view.

by Steve Haner

First published this morning by the Thomas Jefferson Institute for Public Policy.

Does last week’s glowing report on Virginia’s state tax collections presage additional tax relief for struggling families? The first question is, was the news really glowing? Continue reading

Uh, Governor? This is How It Works

by Dick Hall-Sizemore

Someone needs to tell Governor Youngkin or his Secretary of Finance how things work in the state’s financial structure.

According to a recent report in the Richmond Times-Dispatch, the Governor said that he has directed Randy McCabe, the Comptroller, or director of the Department of Accounts, to “to set aside $397 million for a taxpayer relief fund that the governor will ask the General Assembly to create in its next legislative session.”

That sounds impressive. The only problem is that it cannot be done legally. The Comptroller cannot just “set aside” general fund revenues. As Randy McCabe had to remind us in the Department of Planning and Budget on more than one occasion, there has to be some legislative authority to move general fund revenues to a special fund. Therefore, that $397 million has got to sit in the general fund, earning interest, by the way, until the General Assembly authorizes the creation of the special taxpayer relief fund.

There is another factor. There is already a Taxpayer Relief Fund on the state’s books. It was authorized by the 2019 General Assembly for the receipt of “excess” general fund tax collections resulting from the significant changes in federal tax law. The General Assembly authorized tax rebates to Virginia taxpayers from that fund. In FY 2020, more than $425 million was distributed to taxpayers. Continue reading

Higher Ed to General Assembly: More, More, More

Rendering of new Va. Tech. Data and Digital Sciences Building, (authorized 2020) Photo credit: Va Tech

by Dick Hall-Sizemore

The 2022-2024 biennial state budget that became effective on July 1 included more than $1 billion in general fund appropriation for capital projects for institutions of higher education. This was in addition to at least $1 billion in general fund-supported appropriations in the previous biennial budget.

One would think that more than $2 billion in the last two biennial budgets would be enough to satisfy the capital needs of higher ed, at least for a while. But, as my colleagues in the Department of Planning and Budget were prone to say, “There is no satisfying higher ed.”

The ink was hardly dry on the governor’s signature on the new budget bill when higher ed institutions submitted capital budget requests totaling $3.2 billion for the amended budget to be submitted to the 2023 General Assembly, of which $2.6 billion would come from the general fund or be supported by general fund-backed bonds. Continue reading

Virginia Needs Better Information Sharing to Provide Mandated Public Services to Illegals Efficiently and Effectively

by James C. Sherlock

I am on record as a persistent advocate of improving the quality of both schools and medical services for poor and minority citizens. It has been the main focus of my work for years.

In a directly related matter, we read, with different reactions depending upon our politics, of the struggles with uncontrolled immigration on border states on the one hand and D.C, New York City and Los Angeles on the other.

We are treated to the public spectacle of the mayors of sanctuary cities deploring massive new influxes of illegal border-crossers and asking for federal assistance. It provides one of the best object lessons in being careful what you ask for in recent public life.

All of that is interesting, but Virginians know that the problem is increasing. They know Virginia can’t fix it, and they want to know how Virginia will deal with it.

By law we owe illegals services. And we need to provide them efficiently and effectively both for humanitarian reasons and to ensure that citizens are not unnecessarily negatively affected.

There is work to do. Continue reading

Love that Budget Surplus! Use It to Bullet-Proof State Finances.

by James A. Bacon

There’s good news for Virginia on the fiscal front. We need to make the most of it.

The Old Dominion closed fiscal 2022 with a $1.94 billion General Fund revenue surplus, Governor Glenn Youngkin announced yesterday. Total revenue rose 16.3% from the previous fiscal year.

“Fiscal 2022 was an extraordinary year for revenues and finished strong,” Secretary of Finance Stephen Cummings said. While the state has yet to recover all the 133,000 jobs it lost during the pandemic, job growth has been strong this calendar year — 3.5%. And, while competitor states all exceed their pre-pandemic employment levels, Virginia has scored some economic-development coups — LEGO, Raytheon and Boeing most notably. Over the first four months of 2022, Virginia ranked 15th nationally among the states in employment growth. 

Youngkin makes a case for giving some of the revenue surplus back to taxpayers, who are getting clobbered by 9% inflation. I’m sympathetic. Taxpayers are getting the shaft. But I have bigger concerns.

In all likelihood, Virginia’s economic and budget surges are unsustainable. They are byproducts of economic recovery from the COVID-19 shutdowns and massive federal stimulus. The effects of COVID recovery are largely spent, and the federal stimulus is unsustainable. Washington’s political class may delude itself that it can continue ramping up deficit spending with economic impunity, but history suggests that it cannot. Continue reading

Public Featherbedding at the Norfolk Redevelopment and Housing Authority?

The Young Terrace public housing community is along St. Paul’s Boulevard, just north of downtown. (Bill Tiernan) Credit Virginian Pilot

by James C. Sherlock

Daniel Berti published an excellent investigative report this morning in The Virginian-Pilot.

“Norfolk’s housing authority is in ‘dire’ financial condition, bloated after years of failing to downsize” details what may prove to be waste and abuse at that agency to preserve jobs as the administrative requirements and funding of the mission have diminished.

In other words, the report details what some may construe as government agency featherbedding. If it is true, it has been a big mistake, because federal dollars are involved.

I congratulate both the author and the paper on this exclusive. Please read it.

The article, as revealing as it is, does not mention the annual independent audits the Norfolk Redevelopment and Housing Authority (NRHA) is required by federal regulation to undergo.

It has been my experience over the years that local agencies spending federal funds often get into financial trouble that is traceable to audits.

Most often to good audits that are ignored. Continue reading

The Crisis of Reducing Costs and Maintaining Standards at Virginia’s State Colleges and Universities

Courtesy Virginia Tech

by James C. Sherlock

Virginia’s state-funded colleges and universities are too expensive.

Tuitions are the headline numbers.

But student fees and food and housing costs are as important to the budgets of families and individual students as tuition.

Costs within the college system have gone up because of a general lack of management systems and data to support oversight. They are going up further because of inflation in the economy.

Demand is going to plummet starting in 2025 as the “demographic cliff” of a 15 % drop in freshman prospects approaches due to the decline in birth rate in the 2008 recession that lasted for years thereafter.

The missing babies from 2008 would have begun entering college in 2025. Not a rosy scenario for the colleges. They all talk about it a great deal internally.

Some will have to get smaller to maintain student quality admissions standards or, alternately, lower those standards along with those of the programs of instruction.

Maintaining the same staff with smaller numbers of students will not work without massive price increases that they will not be able effectively to pass on without exacerbating the demand crisis.

Action is demanded, or parts of the Virginia higher education system, generally the smaller ones, are going to price themselves out of existence. The ones that do not act will be in a continuing crisis of their own making.

In the realm of enterprise disruptions, declining demand and increased costs are the big leagues. Continue reading

The Governor’s Tuition Freeze Request and the Board at UVa – It’s Complicated

Signatures from the first meeting recorded in the Minute Book of the UVa board of visitors, May 5, 1817 – ALBERT AND SHIRLEY SMALL SPECIAL COLLECTIONS LIBRARY, UNIVERSITY OF VIRGINIA

by James C. Sherlock

Much has been made of a recent request by Governor Glenn Youngkin to eliminate a tuition increase at the University of Virginia and the Board’s decision not to honor it.

The tensions between means and ends that have to be resolved in producing a budget at any large and complex university are enormous.

UVa has implemented a Responsibility Center Management (RCM) budget model.

An RCM budget model decentralizes decision-making, provides incentives for innovation, and improves overall financial results and stewardship. It couples distributed program responsibility with meaningful authority over resources.

A central RCM budget product is thus fragile, in that changes have far reaching effects unpredictable at the board level. The later the changes, the bigger the disruptions.

The Governor’s request, while appropriate to his goal to help parents deal with inflation, arrived just before the start of the fiscal year. The board judged it to be too late to be accommodated.

This is the story of the budgeting process that drove that decision and why the endowment could not be used to fund the difference.  I think elements of this may prove be informative to all who send their kids off to college. Continue reading

This Year the VRS “Diet COLA” Will Really Hurt

by Steve Haner

The most recent year-over-year inflation measure approached 9%, with many key food or energy items growing in cost even faster. The official inflation estimate just used to increase the state’s gasoline taxes as of July 1 was 7%. So what inflation factor will be used to adjust state and local employee pensions this summer? Those will go up less than 4%.  Continue reading

Only Part of the Gas Tax Would Be Suspended

by Steve Haner

The gas tax in Virginia today is 33.8 cents per gallon and the diesel tax is 34.7 cents per gallon.  The fresh proposal from Governor Glenn Youngkin (R) for a 90-day suspension of those taxes does not eliminate Virginia’s full fuel tax bite.  The oft-ignored wholesale tax will remain while only the retail tax goes away.

Bacon’s Rebellion has plowed this ground before.  The Division of Motor Vehicles’ posted information on taxes remains intentionally misleading, listing the retail taxes in one place and mentioning the wholesale taxes somewhere else.   These taxes are also set up by different sections of the Code of Virginia.  Youngkin’s proposal would amend only one of those Code sections. Continue reading

More Legislating Through the Budget

by Dick Hall-Sizemore

Since Governor Youngkin was successful in getting into the budget bill a provision establishing a criminal penalty for possession of more than four ounces of marijuana, he apparently has decided to go even  further in using the budget bill as a means to amend the criminal code without having to go through substantive committees.

The Governor’s proposed amendments to the budget bill include three provisions that would expand  existing criminal procedure and provisions related to offenders in prison and create a new felony offense.  None of the provisions has any relationship to state expenditures or revenues, which is the usual subject of the budget bill. Continue reading

You Just Paid More RGGI Tax, Virginians

Six RGGI auctions have reaped Virginia $378 million.

by Steve Haner

Last week Virginia collected another $76 million in carbon tax dollars through the ongoing Regional Greenhouse Gas Initiative allowance auction. That was the sixth such sale since Virginia joined RGGI, and the state’s total tax take is now $378 million in 18 months.

Do not for one minute allow yourself to be fooled into thinking this money is not coming out of the pockets of Virginia’s citizens or businesses. Do not fall for the ploy Dominion Energy Virginia is attempting by claiming it will charge it off to “base rates.” The pea is still under your walnut shell.  Continue reading

Legislators Deal Huge Blow to Upwardly Mobile Poor Kids

Photo credit: Anna Julia Cooper School

by James A. Bacon

Anna Julia Cooper School was founded as a private, nonprofit middle school in 2009 in Richmond’s poverty-ridden East End. The first-year enrollment in the middle school was 29 students. The founders offered a proposition to students’ families: the school would charge no tuition, but parents had to be committed to the program, which made greater demands and set higher expectations than the city’s public schools.

“In the early days, we had to knock on doors and say, hey, we have a school here,” recalls Laura McGowan, director of development and communications. But it didn’t take long for parents to see the value. Anna Julia Cooper School added an elementary school, the student body has expanded to 176, and now there is a waiting list.

The school has widespread charitable support in the Richmond community, including from churches in the Episcopal diocese. But critical to its expansion, says McGowan, has been a state tax credit, the Education Improvement Scholarship Tax Credit (EISTC), which gives philanthropists a credit on their state taxes equivalent to 65% of their donation. For years the program has been capped at $25 million.

“We like to think that people are donating to the school because they believe in our cause, and the tax credit is an added bonus,” says McGowan. “They go, wow, I can give you more money.” Continue reading

The Inner Circle Shrinks

Sen. Janet Howell (D-Fairfax), chair of Senate Finance and Del. Barry Knight (R-Virginia Beach), chair of House Appropriations. Photo credit: Richmond Times Dispatch

by Dick Hall-Sizemore

In recent years, 13 or 14 Virginia delegates and senators have held extraordinary power and have been the envy of their colleagues. (The total number and the size of the delegation from each house varied over the years.)

They were the conferees on the budget bill and they had the power to make the final decisions on what would be in the budget bill. Their budget report could not be amended on the floor. It was an up or down vote on the whole report. It was inconceivable that either house would reject a budget conference report.

This year was different. There were still 14 conferees, but, from all reports, most did not participate in developing the budget conference report. It seems that only three members were the architects: Del. Barry Knight (R-Virginia Beach), chair of the House Appropriations Committee; Sen. Janet Howell (D-Fairfax), chair of the Senate Finance Committee; and Sen. George Barker (D-Fairfax). Not mentioned in the press, but surely instrumental in putting the conference amendments together, were the staffs of the two committees. Continue reading