Category Archives: Budgets

Boomergeddon vs Modern Monetary Theory (MMT)

by DJ Rippert

Saving America’s bacon. In 2010 Jim Bacon, blogrunner of this site, wrote a book titled Boomergeddon. The sub-title of the book is, “How Runaway Deficits and the Age Wave Will Bankrupt the Federal Government and Devastate Retirement for Baby Boomers Unless We Act Now.” The book is well written and contains considerable supporting detail but that sub-title pretty much sums things up. At the time of publication Bacon’s book amplified the conventional wisdom of the day — deficits are bad and, as our president might say, big deficits are bad bigly. That traditional belief has come under scrutiny lately. One leading critic of the theories espoused by Boomergeddon is Stephanie Kelton, an economics professor at Stony Brook University and former advisor to the Sanders campaign. Her new book, published in 2020, is titled, The Deficit Myth.  One paragraph from the description of Kellon’s book on Amazon.Com sums up her thesis vis-a-vis Boomergeddon. “Kelton busts through the myths that prevent us from taking action: that the federal government should budget like a household, that deficits will harm the next generation, crowd out private investment, and undermine long-term growth, and that entitlements are propelling us toward a grave fiscal crisis.” Kelton believes the United States has considerably more room to incur debt without causing economic harm and we should get about the business of incurring more debt. Paying homage to her Democratic-Socialist roots, Kellon sub-titled her book, “Modern Monetary Theory and the Birth of the People’s Economy.”

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The Trash Tax Returns; Energy Price Hikes Ignored

By Steve Haner

Proving once again how rare are the new ideas, Governor Ralph Northam’s proposed Special Session budget amendments resurrect a possible state-collected solid waste tipping fee, which crashed and burned in 2002 after being successfully tagged a “trash tax.”

The proposal calls for a study to be completed by November 1, laying the groundwork to include the new levy and substantial revenue when the Governor tweaks the budget again before the 2021 Regular Session. When former Governor Mark Warner proposed this, at the Veto Session following the 2002 Regular Session, it would have raised an estimated $75 million annually.

Frankly, what the language calls for (a plan) is something the Northam Administration can just do. By including this directive in the budget document, all the stakeholders are forewarned and forearmed. What’s the plan for the money? “The plan shall include recommendations for the amount and structure of any proposed fee, and recommendations for use of any revenue that may be generated from such fee.”    Continue reading

Pressure Builds on Northam to Crank up Spending

by James A. Bacon

In many ways Governor Ralph Northam has governed as a leftist-progressive Democrat bearing little resemblance to the moderate he proclaimed himself to be when he ran for office. He has expanded Medicaid, mandated a 100% carbon-free electric grid within 30 years, and turned over Virginia’s schools to zealots far more dedicated to expunging “systemic racism” than raising academic performance.

The main exception to his hard tilt to the left has been fiscal policy. Although it’s impossible to describe Northam as a fiscal conservative — he has backed too many revenue-raising measures for that — it is fair to call him a fiscal moderate. Erring on the side of caution, the Governor built up the state’s cash reserves before the COVID-19 epidemic hit and used revenue sources of limited duration to pay for one-time spending initiatives rather than expanding ongoing programs.

The question now is how long Northam can hold the line. As the Virginia Mercury writes today, many Democrats are saying that Northam isn’t spending nearly aggressively enough. Forecasting a $2.7 billion revenue shortfall in the two-year budget cycle, he’s not backing Democratic priorities like tuition-free community colleges, teacher pay raises and expanded health care access until the fiscal picture, clouded by the COVID-19 epidemic and recession, clears up. Writes Graham Moomaw: Continue reading

What About Those Folks Facing Eviction, Governor?

By Dick Hall-Sizemore

In his July 24 letter to the Chief Justice, the Governor requested the Supreme Court extend its moratorium on evictions.  He concluded his request by saying, “This [the moratorium] will provide my administration the time to both work with the General Assembly to develop and pass a legislative package that will provide additional relief to those facing eviction and to expand financial assistance for tenants through our rent relief program.”

So, now that the General Assembly is in session, what has the Governor done for those who lost their jobs due to the pandemic and are facing eviction? The answer is: (1) some help in delaying evictions and (2) no help, so far, in getting the money needed to pay the rent. Continue reading

Northam Asks Legislators: Resist Urge to Spend

Governor Ralph Northam in an almost empty Pocahontas Building committee room, addressing legislators miles away. State photo.

By Steve Haner

Perhaps the most important point about Governor Ralph Northam’s latest Virginia state budget proposal is what he did not recommend. He did not recommend dipping into the state’s current cash reserves to restore spending items which had been frozen. No additional taxes are proposed.

In fact, Secretary of Finance Aubrey Layne told legislators in the budget briefing August 18 that no new budget bill is needed from this month’s special session at all, and the General Assembly could let the current document stand as approved in May until it comes back in January for the full 2021 regular session.

Whether Northam’s cautious, some would say conservative, approach will satisfy the General Assembly or spending advocates will be the story of the special session, at least on the financial front. The run up to the Assembly’s arrival was marked by escalating demands to address issues related to the COVID recession, and general complaints about poverty and income disparity in the Commonwealth.

“We have concentrated on building cash and limiting spending on recurring expenses. That is why I stated we do not need budget action from a financial standpoint. Let’s hope the General Assembly follows suit,” Layne wrote in reply to a question.

That is hardly guaranteed. The frozen spending amounts, more than $2.2 billion, represent some of the highest priorities of legislators (and the Governor himself.)  Most cannot be addressed by using the federal funds provided to respond to the COVID-19 pandemic. They could be funded in part by the more than $1 billion in cash reserves, divided between the official Revenue Stabilization Fund and the more informal Revenue Reserve Fund. Northam left those alone. Continue reading

Taxaginia Reappears As Special Session Looms

Another try at imposing a Virginia estate tax this month?

By Steve Haner

It must be a reflex. Waken or startle a Democrat and they shout, “raise taxes!” Our friends at the Commonwealth Institute for Fiscal Analysis came out Monday with a new list of (mostly old) tax proposals for the August 18 General Assembly special session. It drew the attention of Virginia’s Public Radio in a report this morning.

Keep in mind, it is still unknown (to us anyway) how much (or little) cash the state accumulated to carry forward into the new budget cycle that stated July 1. And nobody outside of state government has seen the new Fiscal Year 2021 and 2022 revenue forecasts, showing the impact of the economic-shutdown-induced recession. We see those August 18. Why wait for actual data before proposing new tax hikes?  Continue reading

Public Employee Collective Bargaining – Questions for Attorney General Herring

by James C. Sherlock

As a consequence of the successful teacher revolt in Fairfax County, there are major legal questions which must be answered concerning the initiation of public employee collective bargaining in Virginia next spring.

In accordance with Virginia Code § 2.2-505, members of the General Assembly can request official opinions of the Attorney General. Private citizens cannot. I urge General Assembly members of both parties to submit the questions posed below.

Teachers associations in Fairfax County Virginia successfully employed threats not to return to work that resulted in a change to Fairfax County Schools policy.

From the Washington Post, “Teachers in Fairfax revolt against fall plans, refusing to teach in-person,” June 26, 2020:

“A day after one of the nation’s largest school systems announced its proposal for fall learning, teachers within Fairfax County Public Schools rose in revolt and refused to teach in-person, as the (previously announced by the school board) plan demands, until officials revise their strategy.”

Those actions force Virginians to confront the consequences under Virginia law of collective bargaining with public employees that will be legal starting in May of 2021. Some but not all of the possible issues are addressed here.

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VEC: 1.5 Million Unemployment Claims In 2020

Virginia and US employment fluctuations since 2004, showing the dip in 2009-10 and plummet in the last four months. Source VEC. Click for larger view.

By Steve Haner

By the end of this amazing year, almost 1.5 million Virginians may have filed claims for unemployment insurance payments, leaving the state’s once-record unemployment trust fund balance of $1.5 billion reduced to $750 million in the red, legislators were told this morning.

That $2.25 billion swing is due to $2.6 billion spent out of the state fund, to cover basic unemployment benefits. To date, the federal government has supplemented that with another $6.3 billion paid to Virginian under special COVID-19 related benefits, which do not come out of the state trust account.  Continue reading

Gerald Smith: Richmond’s New Top Cop

By Peter Galuszka

FYI, here’s a piece I did for Style Weekly about Richmond’s new p0lice chief, the third in about a month, and his interpretation on the problems of law enforcement in this period of defunding.

Conservative Budgeting–Still the Virginia Way

Aubrey Layne, Secretary of Finance

By Dick Hall-Sizemore

Secretary of Finance Aubrey Layne is following in the classic conservative tradition established by his predecessors: under project your revenues and then look good when they come in higher than projected. In his case, he gets to bask, not in a bigger surplus than projected, but in a much lower shortfall than he had projected and much lower than others had expected.

The Richmond Times-Dispatch is reporting that the preliminary data for FY 2020 show a general fund revenue shortfall of $236.5 million, rather than the $1 billion that had earlier been projected due to the effects of the economic shutdown in response to the coronavirus. Although the final numbers will not be available until July 24, it appears that the FY 2020 revenue will be about 1.1% lower than projected. That gap is just above the minimum deficit of 1.0% that legally triggers a re-forecast of 2020-2022 revenues. Continue reading

(Almost) Free Money

By James C. Sherlock

Steve Haner’s superb column on the state budget turned attention to federal aid to state and local governments. It is worthwhile to review where the feds get that money.

James T. Agresti, CEO of Just Facts (chart above), has written recently hat U.S. debt-to-GDP ratio is four times the historical average and climbing:

“The US national debt has just reached 120.5 percent of the nation’s annual economic output, breaking a record set in 1946 for the highest debt level in the history of the United States. The previous extreme of 118.4 percent stemmed from World War II, the deadliest and most widespread conflict in world history.”

The Federal Reserve

The Fed’s dual mandate from Congress is to maximize employment and stabilize prices. The Fed floods the economy with money in times like this and is supposed to sop it up with higher rates when the economy appears to overheat and prices rise too fast. Continue reading

Housing Grants Just a COVID Relief Rounding Error

By Steve Haner

Will $50 million be enough? Will that get all the Virginians who have fallen behind due to COVID-19 square on their rent or mortgage payments? Or is that amount, in a relief program now fleshed out by the Northam Administration, merely a start?

There is a hint on the program’s web page, now available. “Financial assistance is a one-time payment with opportunity for renewal based on availability of funding and the household’s need for additional assistance and continued eligibility.” A Senate committee was told last week that Governor Ralph Northam is considering spending hundreds of millions more for the same purpose.

This first $50 million is just the latest way that the billions of federal dollars flowing into Virginia as COVID-19 relief will be used. Within that operation, it is a  rounding error. On June 23, primary day, the Senate Finance and Appropriations Committee met virtually to be briefed, among other things, on how the four waves of federal assistance have been or will be spent.

The usual suspects of the Capitol Hill press corps may not have been there (or to be exact, may not have been monitoring the Zoom conference.) The primary results and the Phase 3 announcement held their attention. A week later the unreported reports are still worth reviewing and links to them follow below.

Secretary of Finance Aubrey Layne, in his presentation, estimated that Virginia has received more than $28 billion in direct aid – $6.5 billion direct to the state and local governments, $14.4 billion to state businesses in the Payroll Protection Program and $7.3 billion pledged to municipal liquidity facility loans to cover revenue losses.  Continue reading

The Revenue Picture is Bad, But Not as Bad as Expected

By Dick Hall-Sizemore

The state’s May revenue report has been released today.   As one would have expected, the May 2020 general fund (GF) revenues were down significantly from May 2019 and the year-to-date GF revenues are running behind the annual forecast.

However, on the somewhat bright side, the administration is now saying that it expects the decline in GF revenue for the fiscal year to be less than previously predicted.  In last month’s report, Secretary of Finance Aubrey Layne predicted that the shortfall in FY 2020 GF revenue would be $1 billion.  Now, he anticipates that “fiscal year 2020 revenue collections will be less than $ 1 billion below the official forecast.”   Layne told the Richmond Times-Dispatch that total GF revenues for the year were down about $800 million and he expected that the state would make some of that up in June.  He summarized by saying, “We’re going to end the fiscal year in a better position than being $1 billion down. I don’t know how much it’s going to be, but the good news is what we have projected and told people — we’re going to be well within that.” Continue reading

Gunning Up Virginia’s Cops

By Peter Galuszka

 In 2014, the Sheriff’s Department of York County and Poquoson got their very own tank-like vehicle, called a “Mine Resistant Ambush Protected (MRAP).”

Fully armored and tan in color with steep sides, it looks like something out television footage of the war in Iraq where U.S. troops needed to get through mine-infested streets and terrain safely.

But why do such generally sleepy communities such as these need a high-powered armored car? Sheriff J.D. “Danny” Digs told The Virginian-Pilot and Daily Press that it isn’t meant to “intimidate people” but can be useful during adverse weather when trees are down. Really? Wouldn’t a pickup truck work?

The newspaper story is important since it combs through what Virginia law enforcement got after the “1033”Defense Department program started to sell surplus military gear to local law enforcement in 1997.

It notes that military surplus sales in Virginia went from $216,000 in 1999 to $853,824 in 2019, according to Defense Logistics Agency statistics. The latter number included the cost of another MRAP so Virginia Beach could get its very own armored truck. Over time, the City of Portsmouth got 87 M-16 assault rifles. Other goodies include night vision glasses. Continue reading

Remember Petersburg!

Robert Bobb, of the Robert Bobb Group, functioned as Petersburg’s de facto CFO for a year or more. He was tough, but he got the city’s books straightened out.

by James A. Bacon

Two weeks ago, the U.S. House of Representatives passed a $3 trillion coronavirus-relief bill that would direct nearly $1 trillion to state, local and tribal governments. This massive bail-out would come on top of massive assistance to states and localities in previous legislation: $150 for a Coronavirus Relief Fund, $30 billion for an Education Stabilization Fund, $45 billion for the disaster Relief Fund, $25 billion for public transit systems, an increase in the federal government share of Medicaid spending, and billions more for miscellaneous programs. Also the Federal Reserve Bank has set up a $500 billion program to facilitate short-term state and local borrowing.

The ball is now in the U.S. Senate’s court. What, if anything, will the Senate propose in the way of a second wave of fiscal assistance? Judging from their press releases, Virginia Senators Mark Warner and Tim Kaine have so far refrained from committing themselves to a Pelosi-style bail-out of the states. Their statements have focused on narrow-bore initiatives for water improvement projects, National Guard benefits, and a restaurant meals program for Americans struggling with food security.

Sooner or later, however, they may be called upon to either support or oppose a second-wave bailout. They will receive intense pressure from their Democratic Party colleagues representing the states — Illinois, New Jersey, New York, Connecticut — in most desperate need of fiscal rescue. When they do so, I hope that that the two former governors will remember the hard choices they made to keep Virginia’s fiscal house in order, and, similarly, how the McAuliffe administration forced the City of Petersburg, when faced with fiscal collapse, to make hard, hard choices to put its finances in order. Continue reading