Category Archives: Finance (government)

Inflation and the Budget

by Dick Hall-Sizemore

In addition to conventional budget requests, the Youngkin administration is likely to receive requests from agencies in the fall budget development exercise for additional funding to enable them to cover additional costs resulting from higher inflation. (Yes, I realize that the 2022-2024 biennial budget has not even been agreed upon yet, but, once one round is out of the way, budget folks are always getting ready for the next round.)

With some exceptions, inflation is not normally built into budget bills. Budget development for a biennial budget starts with a base budget, which is the appropriation for the second year of the most recent biennium. Adjustments are made to the base, but rarely are those adjustments for inflation. As for the mid-biennium budget, agencies normally are not provided additional appropriations to cover inflationary costs. Continue reading

Lies, Damn Lies and Statistics in the Virginia Department of Education – Average Teacher Salaries Edition

by James C. Sherlock

I was in the early stages of researching a column on school salaries in Virginia when I came upon yet another bad report.

In 2021 Special Session I, the General Assembly directed the Superintendent of Public Instruction to provide a report on the status of staff salaries, by local school division, to the Governor and the Chairmen of the Senate Finance and Appropriations and House Appropriations Committees.

The appropriations committees wanted to know how much teachers and others were getting paid so they could raise the state contribution. It would seem to be a report that VDOE would like to get correct.

As with many other reports I have documented, the January salary report on its face cannot possibly be correct. VDOE and thus the Governor and General Assembly have no idea how much teachers and other instructional staff are paid in Virginia.

This report was a parting gift from the Northam administration.

The question itself — average salaries — may prove not to provide information useful for legislation and appropriations however accurately it is answered. Continue reading

Richmond’s Reaganesque Time for Choosing

Chris Braunlich

by Chris Braunlich

Richmond, like Washington, has always been a place where an “insider’s game” is played – not in a pejorative sense, but simply as the way things are done.

Relationships are paramount, people speak in the arcane language of lawmaking, agendas are confusing for outsiders, and the activities of a subcommittee for an obscure commission are followed in detail because those in the know understand that what happens there will end up as a new regulation. Continue reading

Richmond, Its Unions and Taxes

by James C. Sherlock

Richmond residents should note that:

The number of employees at City of Richmond in year 2020 was 4,140.

Average annual salary was $56,410 and median salary was $50,001. City of Richmond average salary is 20 percent higher than USA average and median salary is 15 percent higher than USA median.

Median per capita income in Richmond in 2020 dollars was $35,862. Median household income was $51,421. Approximately 21% of Richmond citizens live below the poverty level.

The City of Richmond’s FY 2023 total General Fund budget is estimated to be $836,015,828, an 8.18% increase when compared to the FY 2022.

The increases in spending represent a projected balanced budget based on estimated increases in revenues. Those in turn are driven by a projected increase in General Property Taxes – notably a 13.13% increase in real estate tax collections; increases in Sales Tax (9.27%); and increases in Prepared Meals Taxes (15.95%).

Those increases in tax collections are largely from Richmond taxpayers. How many got double-digit increases in income in 2022? Just asking.

Now the Richmond City Council is about to approve negotiations with its unions on pay and benefits. The RPS, of course has gone much further than the City Council in putting everything on the table.

Those costs are not in the budget. Continue reading

Richmond Parents and Taxpayers, Welcome to Chicago Public Schools

by James C. Sherlock

The gulf between what the City of Richmond School Board (RSB) and the Richmond City Council (RCC) on what will be negotiated with their public unions is actually an ocean.

The RSB has authorized the negotiation of virtually everything about how the schools are run. It leaves nothing off the table except the right to strike and the right to negotiate a closed shop (Virginia is still a right to work state), both of which state law still prohibits. But the unions can negotiate what are essentially the work rules of a closed shop.

In contrast, the City Council is poised to pass an ordinance on May 5th from two candidate drafts, one from Mayor Stoney and the other from three Council members. The Mayor’s version states what will be negotiated — pay and benefits. The other states what will not be negotiated with an eleven-point description of the City’s Rights and Authorities.

The City Council drafts, especially the Mayor’s, have it right. They note the City Council’s duties under the laws of Virginia and to the citizens of their city.

Not so the school board. The RSB resolution acknowledges only one stakeholder: its unions.

Unmentioned in the RSB resolution is exactly who is going to represent the city in its negotiations with its unions. Ideally it will be a team composed of City Council (finance) and School Board subject-matter experts. If so the city reps will be operating under two sets of negotiating rules in direct opposition to one another.

I’d buy a ticket, but maybe under the sunshine laws negotiations will be on TV. Continue reading

How Do We Pay to Fix the Schools?

Virginia Middle School in Bristol — built in 1906.

by James A. Bacon

It has long been recognized that some of Virginia’s public schools are in scandalously poor condition — leaky roofs, mold, asbestos, outdated HVAC systems, clogged toilets, and so on. More than half of all school buildings in the state are greater than 50 years old. In mid-2021, school districts across Virginia had identified $9.8 billion of projects in their Capital Improvement Plans. Replacing all buildings 50 years or older would cost $24.8 billion, according to a Virginia Department of Education needs assessment.

As Radio IQ points out in an article today, Virginia engaged in a wave of public school construction in the 1950s and 1960s, and those buildings are aging out. No one knows where such funds will come from. Some counties are affluent enough that they can raise property taxes to cover the cost of issuing and paying off bonds. Some counties aren’t. The General Assembly is debating how to help, whether by providing half a billion dollars in grants or up to $2 billion in loans, reports Radio IQ.

Here’s what makes any discussion of state bail-outs tricky: some localities have been proactive, either raising taxes or setting aside reserves, while others have kicked the fiscal can down the road. There is a danger that a massive, statewide infusion of state funds into local school districts will subsidize the improvident and leave the prudent short-changed. Continue reading

Causes of the School Funding “Crisis”

Courtesy Wise County Public Schools

by James C. Sherlock

Read the story, “House and Senate lay out dueling visions for education funding in Virginia,” in the Virginia Mercury this morning by the reliably thorough Kate Masters.

If you follow it, you, like everyone else in Virginia, can pick a side or pick provisions from both houses that you prefer.

What you won’t find in either budget version is an attempt to tackle the massive amounts of money that are wasted in plain sight. Much of the waste is attributable to faulty or non-existent assessments of need and misplaced local priorities.

The rest is traceable to the self-serving inputs of the schools of education, which have owned and operated the Virginia Department of Education (VDOE) for years. Continue reading

“Frozen” Property Taxes

by James C. Sherlock

I admit my fascination with how newspapers present various issues. It is an important window into the information their readers are getting.

City manager and county executive proclamations that property tax rates are “frozen” are meant to sound like fiscal constraint. Consider this headline from The Washington Post:

“Fairfax County executive proposes budget with tax-rate freeze, less pandemic austerity”

First paragraph:

“Fairfax County Executive Bryan Hill proposed a budget Tuesday that would freeze the residential property tax rate while spending more on county services — part of a push to end fiscal austerity in Northern Virginia amid signs of economic stability”

End “fiscal austerity” in Fairfax County. Seriously?

“Hill was able to present a $4.85 billion spending plan that focuses on some key areas of growth for Virginia’s most populous jurisdiction while keeping the residential property tax rate at $1.14 per $100 of assessed value.”

Where do we get such men? Everybody wins, right? Continue reading

Everybody Wins – Nurse Practitioners for Underserved Communities

by James C. Sherlock

The University of Pennsylvania School of Nursing has instituted a terrific program thanks to a wealthy alum who gave $125 million to recruit and train nurse practitioners to practice in underserved communities.

The Leonard A. Louder Community Care Nurse Practitioner Fellows program will be tuition-free and students who still need help will be granted stipends. The program will start with 10 enrollees next year, eventually reach an annual target enrollment of 40 Fellows, and will be sustained by income from the grant. (See the link above for additional details.)

What attracted me to this is the need in Virginia.

The program fits like a glove with a parallel program, Health Enterprise Zones, which in Maryland has saved enough Medicaid money to fund a Virginia Nurse Practitioner Fellows Program here. Continue reading

A Conservative Proposal

by Dick Hall-Sizemore

Gov. Glenn Youngkin has reported to the General Assembly that the state can expect to bring in an additional $1.25 billion in general fund revenue in the current fiscal year. This is an astounding mid-session revenue projection. He is proposing that the state “give it back” to taxpayers.

Of the projected $1.25 billion in additional revenue, under the provisions of the state constitution, about $499 million would have to be deposited into the state’s rainy day fund, leaving approximately $751.4 million.

The Governor obviously thinks there is already enough general fund revenue to fund the operating and capital needs of the Commonwealth. I could identify a few, relatively small items that I feel should be better funded than they are, but I will desist. Instead, I have a proposal that should appeal to conservatives everywhere — pay off some of the Commonwealth’s credit card balance. Continue reading

You Want to Raise Your Tax on Yourself? Forget It.

Del. James Edmunds (R-Halifax)

by Dick Hall-Sizemore

Several years ago, officials in Halifax County were confronting the problem of what to do about the local high school. There was consensus that something needed to be done. The only question was whether to make extensive renovations or build a new one. Depending on the option selected, the price tag was estimated to range from $88 million to $100 million.

The debt service on either amount would have been significant, especially for a county with a median household income of $42,289, ranking it 105 out of 132 jurisdictions. At the behest of his home county, Delegate James Edmunds, R-Halifax, introduced legislation (HB 1634) in the 2019 Session of the General Assembly that would have authorized any locality, subject to approval in a local referendum, to increase its local sales tax, with the additional revenue earmarked for school renovation or construction. As was common with such legislation, the bill morphed from one of general application to being applicable only to Halifax County and with a cap of one cent on any increase. The bill was reported out by the House Finance Committee on a 13-8 bipartisan vote and passed both houses with strong bipartisan votes (77-23, House; 29-11, Senate). Continue reading

Boomergeddon Watch: We’re Right on Track

by James A. Bacon

The U.S. national debt has passed a symbolically important milestone of $30 trillion. That’s up from the $13-$14 trillion when I wrote my book, “Boomergeddon,” in 2010 warning that the U.S. government was heading to functional insolvency by the late 2020’s or early 2030’s. I argued that higher deficits and debt were inevitable as Republicans and Democrats in Congress followed the path of least political resistance — more spending and lower taxes. The U.S. is careening toward certain fiscal crisis by 2033, when the trust fund for the Social Security system runs dry and payments to retirees are slashed to 76% of promised benefits.

One thing I did not take sufficiently into account in Boomergeddon was the resurgence in inflation caused by monetization of the debt. I thought the political class had learned its lesson from the 1970’s era of stagflation (stagnant growth + inflation), and would hold inflation in check. Higher inflation allowed government to repay its debt with cheaper dollars for a time, but investors demanded higher interest rates to offset that erosion plus they added a premium for uncertainty. The inflation rate in 1980 hit 13.5% and the federal funds rate peaked at 20%. Forty years later, it appears that those lessons have been forgotten. The Consumer Price Index rose 7% last year. And while it could subside, it will remain far higher than the 2% targeted by the Federal Reserve Bank.

The U.S. is now in a fiscal/monetary box. Continue reading

Financing Public Education–Part I, Standards of Quality

by Dick Hall-Sizemore

The 2022-2024 budget proposed by Governor Northam includes $8.6 billion in general fund appropriations in the first year and $8.3 billion in the second year for state assistance to local K-12 programs. These amounts are a little more than a quarter of the entire general fund budget. Compared to the appropriation for the current fiscal year, these proposed amounts are an increase of $1.3 billion (18.2 %) in the first year and $1.0 billion (14.3%) in the second year. It is easily the largest budget proposed for public education in the state’s history.

The details of state funding for public education can be mind-numbing; they take up more than 40 pages of closely-spaced type in the proposed budget bill. Those details are known and understood by only a relative handful of individuals in and around state and local governments. Continue reading

Embarrassing Managerial Incompetence

M. Norman Oliver M.D., Virginia Health Commissioner

by Dick Hall-Sizemore

The Northam administration has just had an embarrassing case of managerial incompetence exposed.

A series of articles by the Richmond Times-Dispatch’s Patrick Wilson (here, here, and here) sets out the story of the Department of Health laying off 14 state employees who monitor drinking water systems across the state, including six field directors with a combined 180 years of experience, due to “budget error.” This office monitors water quality across the state, enforces state and federal drinking water standards, handles inspections and permits, and assists with lab testing.

The sad tale has its beginning in 2019, when the Department of Health’s Office of Drinking Water, being advised by agency administrators that it had the funding to do so, provided salary increases to 55 employees in the office and opened a field office in Richmond with four people. It turned out that advice was wrong, with a resulting shortfall projected to be $1.4 million this fiscal year. So, now, almost halfway through fiscal year 2022, the agency, facing a budget shortfall in that budget line item, tells these 14 people they are going to be laid off, effective January 9. Continue reading

Infrastructure Vote? Oh No, That’s Their Bill

Photo credit Verizon

by Dick Hall-Sizemore

There has long been a consensus that America needs to pay more attention to its infrastructure. Last week, the House of Representatives passed President Biden’s $1.2 trillion infrastructure package and sent it to the President for his signature. Of the total amount, $550 billion was new money; the remainder was funding normally allocated each year for highways and other infrastructure projects.

The bill had passed the Senate earlier in the year on a bipartisan vote, 69-30. Even Mitch McConnell voted for it. However, in the House, only 13 Republicans voted for the bill. The rest of the House Republicans were angry over the support given the bill by some of their fellow Republicans. Probably the most galling aspect was that the 13 Republican votes were needed to pass the bill after six far-left Democrats, who refuse to, and do not understand the need for, compromise, voted against the legislation. Continue reading