By Dick Hall-Sizemore
As a diversion from the coronavirus story, as well as an effort to give you a little more variety, the following is my previously promised summary of the General Assembly’s changes to the capital budget. (It was only a little over two weeks ago that the legislature adjourned, but it seems much longer.)
The actions of the General Assembly were both surprising and not surprising. The surprise was that, for the first time in many years, maybe ever, the legislature ended up authorizing fewer capital projects and less debt than the Governor had recommended. The non-surprise was the winners and losers. Continue reading
In answer to some calls on this blog for immediate adjustments to the state budget, my response was: Don’t panic. There is a process already in place to deal with such a situation. Now, there is even less reason to panic. It is reported that the Commonwealth will receive at least $1.5 billion from the federal rescue package that will soon be enacted.
Just as the Obama stimulus package (along with shortchanging the state pension system) helped Bob McDonnell balance the budget in the middle of the financial crisis without a tax increase, this new rescue or stimulus package should help Governor Northam weather the economic storm caused by the coronavirus. Continue reading
My first post in two weeks. What the heck, I should join the parade and give a bunch of advice to our beleaguered Governor which he is likely to ignore. This first appeared today in the Fredericksburg Free Lance-Star. It has one of those annoying “take a survey” paywalls, but in this case asks a question we should all answer. Try it.
By Steve Haner
The assumptions underlying the most contentious debates of the 2020 General Assembly session are gone. Sixty days ago, activists were arguing that this was a rising economy and state government should mandate raising workers to a higher level.
This is a now sinking economy, and the General Assembly’s actions have piled bricks on the life rafts that workers in the commonwealth will need to survive.
The priority now is containing the spread of this respiratory virus, but soon it becomes reviving an economy that has come to a near stop. Nobody knows when or where unemployment will peak, but this is starting to look more like 1929 than 2009.
Gov. Ralph Northam’s lasting legacy will not be his response to the virus, but the speed of the following recovery. Continue reading
By DJ Rippert
And then there were two. Today, Elizabeth Warren announced that she will withdraw from the presidential race. That leaves Joe Biden, Bernie Sanders and Tulsi Gabbard (yes, she’s still running) as the remaining candidates for the Democratic nomination. Given that Tulsi Gabbard has exactly one delegate (from American Samoa where she was born), the odds of her prevailing are so low that the race can safely be considered a two- man contest. Two weeks ago Joe Biden’s campaign seemed deader than disco. Then came Super Tuesday. Now he’s the front runner.
It seems worthwhile, then, to consider how Biden’s announced policies would affect Virginia if he were elected president this November. Politico keeps an updated list of the candidates’ positions on the issues which you can see here. Politico records the candidates’ positions using fifteen categories. This blog post examines the first five categories — criminal justice, economy (excluding taxes which is a separate category), education, elections and energy (including the environment and climate change). The remaining ten categories will be examined in future articles.
Posted in Business and Economy, Commentary, Courts and law, Crime and corrections, Education (K-12), Elections, Federal, Finance (government), Money in politics, Politics, Taxes
Tagged DJ Rippert, Don Rippert, Joe Biden
Feel-good story of the day. Musical superstar Pharrell Williams, a Virginia Beach native, is collaborating with the city’s Convention & Visitors Bureau to create two 60-second commercials, featuring his soon-to-be-released song “Virginia,” promoting Virginia Beach as a city open to tourists. Pharrell contacted city officials after the mass-shooting last year, asking how he could help his home town. One of the commercials, reports the Virginian-Pilot, will show the work that takes place in early-morning hours to prepare for visitors: a man cleaning kayaks to rent, a chef chopping vegetables, city workers grooming sand on the beach, hotel staff fluffing pillows. Williams composed the hit song, “Happy,” which went wildly viral as hundreds of groups shot videos of themselves lip syncing to the song.
Good news from Petersburg. After digging itself out of the worst fiscal meltown in modern Virginia history, the City of Petersburg is reporting its first positive fund balance in four years. The city’s “unassigned fund balance,” not earmarked for a specific portion of the General Fund, came in at $2.8 million in Fiscal 2018, reports the Progress-Index. The city has set a goal of increasing the unassigned balance to $7.6 million. Petersburg was no more reckless than any number of other cities across the United States, but Virginia is less forgiving of fiscal incompetence. As a consequence, the poor, largely African-American municipality was forced to make hard choices and enact brutal spending cuts. Now it is emerging more financially disciplined than before. If Petersburg can straighten itself out, so can other deadbeat states and municipalities. If Virginians demanded that Petersburg make sacrifices, we should expect the same of others, too. Puerto Rico, I’m talking to you! Chicago, I’m talking to you!
When “multicultural” means “nonwhite-cultural”… Last week video surfaced of a black female student delivering a “public service announcement” at UVa’s new “Multicultural Student Center.” Apparently, the “multi” part did not include white culture. There were “just too many white people,” the young woman informed the unwelcome visitors. The center, she said, was “a space for people of color.” To its credit, the University administration issued a statement affirming that the center is “open to all members of the University community.” But it appears that a lot of students (including many white students) agree with the young woman. In interviews published on The College Fix, many students agreed with the proposition that minorities need a “safe space” free from whites.
By Dick Hall-Sizemore
Each session there are bills that are introduced probably with the best of intentions and approved for those reasons, but are basically bad policy and are likely to have unintended consequences. They are not “big” bills and do not generate headlines, but skate under the radar. I want to highlight three that have come to my attention and are in an area with which I am familiar.
Inmate medical copay. (HB 281—Hope.) This legislation would repeal the authority of the Department of Corrections to charge inmates a co-pay for medical services. Inmates now are subject to a $5 co-pay for offender-initiated medical visits. No inmate is denied medical services due to a lack of funds in his account. The revenue generated by the co-pay is used to support the agency’s telemedicine program. The House amendments to the budget bill include $405,000 from the general fund each to replace the revenue lost. Continue reading
By Dick Hall-Sizemore
Almost totally overlooked or ignored among capital projects in the budget bill are those higher ed projects financed with revenue bonds. They are probably ignored because their passage does not affect the state’s debt capacity and tax revenues are not needed for debt service. Nevertheless, they do have an impact on Virginia citizens.
For most higher ed institutions, these bonds are issued by the Virginia College Building Authority (VCBA). The debt service is covered by revenue from a variety of non-tax sources, such as room and board fees, parking fees, donors, and general student fees. The issuance of these bonds has to be approved by the General Assembly. Continue reading
Source: Debt Capacity Advisory Committee, 2019 Report
By Dick Hall-Sizemore
This report on the capital budget section of the budget bill is later than I had planned. There is so much going on with the General Assembly this year. I was familiar with the term “like trying to drink from a fire hose.” Now, I know the experience.
Because the vast majority of capital projects are funded with tax-supported bond proceeds, any discussion of the capital budget proposals needs to start with the Commonwealth’s debt picture. (The source of the data on the debt is the latest annual report of the Debt Capacity Advisory Committee (DCAC). Anyone wanting a clearly written explanation and discussion of the Commonwealth’s debt status can find the report here.)
Outstanding tax-supported debt of the Commonwealth more than doubled over the last ten years, from $10.6 billion (FY 2010) to $21.7 billion (FY 2019). This total is comprised of debt issued for general construction and for transportation facilities, as well as pension and other post-employment benefits liabilities. Continue reading
by James A. Bacon
According to the latest Congressional Budget Office (CBO) projections, the federal budget deficit will hit $1.0 trillion in 2020 and will average $1.3 trillion annually for the rest of the decade. Deficits will increase from 4.6% of gross domestic product each year to 5.4%. Most alarmingly, chronic deficits will push the national debt as a percentage of the economy from 81% this year to 98% in 2030, and to a mind-blowing 180% by 2050.
In my book, “Boomergeddon,” written 10 years ago, I went out on a limb and forecast fiscal collapse by the early 2030s, soon after the Social Security trust fund ran out and Congress had to make no-win decisions on how to cope with the inability to maintain retirement payments to seniors. While things still appear dire by 2050, a 98% debt-to-GDP ratio in 2030 looks manageable. Perhaps I was too pessimistic.
The CBO’s not-so-rosy forecast makes one big assumption, however: There will be no recession this decade. The current business cycle is the longest in U.S. history. So unless the geniuses who run the economy have truly figured out how to engineer perpetual prosperity, the U.S. is at extremely high risk for another recession within the next ten years. When it comes, the picture will change dramatically. Let’s see what CBO’s long-term forecasts look like when deficits are running $2 trillion a year! Continue reading
In 1993, the late, great Delegate Chip Woodrum of Roanoke introduced a bill, which was subsequently enacted into law, to hold the General Assembly fiscally accountable for any legislation it passed that would add to the Commonwealth’s prison population. The statute has been tweaked several times since its original enactment, but the overall purpose remains the same: the General Assembly must provide a specific appropriation to cover a portion of the costs of housing any additional inmates resulting from the passage of a crime-related bill. Around Capitol Square, any legislation meeting this criteria is known as a “Woodrum bill.”
Del. Chip Woodrum Photo credit: Richmond Times-Dispatch
The statute directs the Virginia Criminal Sentencing Commission (subject of a future post) to prepare the fiscal impact statement. In accordance with the law’s provisions, the Sentencing Commission staff project how many additional inmates would be housed in each of the succeeding six years as a result of the enactment of a proposed bill. It then takes the highest of those six annual projections and multiplies it by the average annual cost of housing an inmate in prison (supplied by the Department of Planning and Budget) to determine the fiscal impact of the bill. If there is insufficient data available to make a determination of a bill’s impact, a provision of the Appropriations Act requires that an impact of $50,000 be assigned. Continue reading
Judge John Dillon (look familiar to regular readers of this blog?)
by Dick Hall-Sizemore
For the participants on this blog who have longed for the lifting of the yoke of the Dillon Rule from the necks of local governments, major relief is in sight. However, you may not like the area in which it is being contemplated: taxation.
Generally, Virginia counties have less authority than cities and towns to levy certain taxes. Cities and towns have general authority in the Code to levy the following taxes: admissions, transient occupancy, cigarette, and meals. As far as counties are concerned, the General Assembly over the years has given individual counties, as specified in the statutes, authority to levy some of these taxes. In some cases, that authority carries limits and, in the case of the meals tax, it must be approved by local referendum to be effective.
As reported in today’s Richmond Times-Dispatch, legislation has been introduced in both houses of the General Assembly to provide counties the same taxing authority as cities and towns. Furthermore, it seems that these bills have widespread support. Particularly striking is HB 785, introduced by Del. Vivian Watts, D-Fairfax, chairman of the House Finance Committee, the committee that has jurisdiction over tax bills. Co-patron of the bill is Del. Terry Kilgore, a senior Republican from Scott County. The bill would provide counties general authority to levy these taxes, without any caps or referendum requirement.
If any of these proposals are enacted and your county subsequently adopts a new tax or increases an existing one, you can’t blame those Democrats in Richmond; you need to blame your board of supervisors. And, of course, these measures would not eliminate the application of the Dillon Rule in the Commonwealth. What the General Assembly giveth, the General Assembly can take away.
by Don Rippert
Your General Assembly in Action (or inaction). The Coalition for Integrity (C4I) has rated the political ethics enforcement approaches of the 50 states. Virginia’s ethics enforcement is so weak that it is one of seven states that cannot be rated. This should not be surprising to anybody who regularly reads this blog. The other un-ratable states are Arizona, Idaho, North Dakota, Vermont and Wyoming. The Coalition for Integrity acknowledges that Virginia has two ethics boards (Virginia Conflict of Interest and Ethics Advisory Council and the Virginia House Advisory Panel) but finds that both have “Limited or No Power”. As the Center for Integrity states in its general recommendations, “A toothless ethics agency serves no purpose. Agencies need wide powers to investigate and sanction all government personnel. Currently, seven agencies have limited or no investigative or sanctioning power.” Of course Virginia is one of the seven. Continue reading
McKee Foods’ Little Debbie
Don’t underestimate Little Debbie – the spunky tyke took on the Augusta County tax collectors and won. But the county still has her money.
The Virginia Supreme Court has sided with manufacturer McKee Foods Corporation, which makes the Little Debbie snack products, in a dispute over the tax assessment on its 828,000-square-foot factory in Augusta County. The July 18 opinion by Chief Justice Donald Lemons (here) reverses a lower court decision, rejects the county’s existing valuations and sends the dispute back to the local circuit court for another look. Continue reading
2018 labor force participation rates. Source: VEC. Click for larger view.
Laissez les bon temps roulez. Virginia’s strong employment climate is adding a financial spare tire to Virginia’s unemployment trust fund, now above 83 percent solvency by one actuarial measure and exceeding a federal recommended minimum balance on another measure.
The annual unemployment fund status update for a legislative oversight commission Wednesday lasted about 30 minutes, with the chairman, Del. Lee Ware, R-Powhatan, noting it was far shorter and less dramatic than some previous meetings in tight times, adding “it’s a good drama not to have.” The presentation is here.
The projected $1.45 billion fund balance for next December 31 will be another record, said Virginia Employment Commissioner Ellen Marie Hess. The figures used are not adjusted for inflation, however, and the state has been at higher solvency levels in previous periods of prosperity. The funds are just sitting there earning interest and awaiting the next recession, which history deems inevitable. Continue reading