Category Archives: Finance (government)

Governor’s Plan to Bolster Law Enforcement Is Meek Rather Than Bold

by Dick Hall-Sizemore

In October, amidst much fanfare, Governor Youngkin announced Operation Bold Blue Line.  In the words of the Governor’s press release, this initiative is “a series of concrete actions to reduce homicides, shootings, and violent crime.”

I had some questions and wanted some details on the proposal.  I posed these questions to the Governor’s press office.  Crickets.  I then posed them to the office of the Secretary of Public Safety and Homeland Security.  I got an acknowledgement and a pledge to provide the information I had requested.  Time marched on and no answers, just requests for more time to prepare the response.  Finally, I was told that my inquiry was being bumped to the Governor’s press office.  Fortunately, someone in that office did respond and answer my questions.

After doing some research and reading the responses to my questions, I have to say that I am underwhelmed by this initiative. Continue reading

A Conservative Fiscal Proposal

by Dick Hall-Sizemore

Governor Youngkin has proposed tax reductions that would reduce state revenue by about $1 billion in this biennium.

I have an alternative proposal on how to use that billion dollars, one that should appeal to the instincts of conservatives on this blog—reduce the Commonwealth’s outstanding debt balance.

The Debt Capacity Advisory Committee has reported that, as of June 30, 2022, the Commonwealth had a balance of $4.0 billion in authorized but unissued tax-supported debt. Using the $1 billion in general fund revenue that Youngkin proposes to forego in the form of tax reductions to supplant bond authorizations for capital projects instead would save the Commonwealth a significant amount in interest payments over the course of the term for which those bonds are now authorized. I do not have all the data needed to project the savings, but it could easily be several hundred million dollars over the course of 20 years.

Financial advisors often urge individuals to pay down debt balances whenever possible. It seems that would be a prudent move for the state as well.

Whiplash on Virginia’s Economy

by Dick Hall-Sizemore

“Our beloved Commonwealth is in a ditch.” Glenn Youngkin, May 7, 2021.also see here.

“The commonwealth has never been in a stronger financial condition.” Glenn Youngkin, Nov. 21, 2022

Double-Standard Bonds

by Jon Baliles

One of the eternal mysteries of the Commonwealth of Virginia’s governing structure is the separate treatment of counties and cities. We are the only state in the country that has the screwy system of independent cities that are not part of a county government or structure. But that’s not where the screwiness stops.

For some reason, the state treats bond referendums for cities differently than those for counties. A county can issue bonds for major projects (usually for schools, roads, fire stations, libraries, etc.), but it has to be put to a voter referendum for approval. The state doesn’t want localities to spend what they don’t have, and then come to the state for a bailout.

Cities, however, can authorize major bond issuances with just the approval of the governing body (i.e., City Council). State code section § 15.2-2636 states: “The governing body may authorize and issue bonds in accordance with the applicable provisions of this chapter, without submission of the question of the issuance of the bonds to the voters for approval.”

So what? It is important to remember that this different “standard” allows cities to make bond referendums much more susceptible to politics (and shenanigans) because you only need a majority of votes of the governing body. That’s a much easier bar to clear than having to convince voters.

I bring this up only to point out the difference in referendums and what localities use them for. What we saw this week in our region were two huge referendums pass overwhelmingly: Henrico ($511 million); and Chesterfield ($540 million). Continue reading

State Treasury Brings In More General Fund Revenues Than Projected

by Dick Hall-Sizemore

Some commenters on this blog have expressed serious concern about the choices facing Governor Youngkin this fall in the development of his recommended amendments to the state’s two-year budget. They cite the prospects of recession and the uncertainty created by such prospects. They can rest a little easier for now.

The Secretary of Finance has informed the Governor that the Commonwealth’s first quarter general fund revenues for the current fiscal year are $500 million ahead of projections, or 7.6%. In September alone, after adjusting for timing differences, “total general fund revenues increased 10.7 percent for the month compared to a year ago.” 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

Continuity in the State Finance Agencies

Stephen Cummings, Secretary of Finance

by Dick Hall-Sizemore

The lead story in Tuesday’s  Richmond Times-Dispatch was a curious one. Its headline promised great drama, which was not delivered, and it missed the real story.

The headline, “Retirements Transform State Finance Agencies,” promises great drama. The primary agencies in the Finance Secretariat are the Department of Accounts (DOA), Department of the Treasury (Treasury), Department of Taxation (Tax), and Department of Planning and Budget (DPB). Since January, the directors of three of those agencies (DPB, DOA, and Treasury) have retired. At Tax, the long-time assistant commissioner for tax policy and the chief economist and director of revenue forecasting have retired.

One could speculate over the recent announcement of Manju Ganeriwala (Treasury), after 13 years as agency head and the earlier retirement of David Von Moll (DOA), since they had both been reappointed to their jobs by Youngkin. Why would one retire from a good position after being reappointed? On another level, Jeff Schapiro of the Richmond Times-Dispatch hinted that John Layman, the revenue forecaster at Tax, had been forced, or at least nudged, into retirement. Continue reading

Details on Real Estate Assessments and the Property Tax

by Dick Hall-Sizemore

I am following up on James Sherlock’s article on local property taxes.

In Article X, sections 1 and 2, the state constitution requires that all property be taxed at fair market value. There are exceptions, but those are not relevant to this discussion. So, there you have it. Unless the constitution is amended, localities must tax property at fair market value.

State law recognizes the impracticality of assessments keeping up with fair market value on a continual basis.

One of the main reasons that assessments lag behind market value on a statewide basis is the varying frequency of reassessments by localities. State law requires cities to reassess every two years, except that cities with a population less than 30,000 can use a four-year reassessment cycle. For counties, the law allows them to go four years between reassessments, except for counties with a population under 50,000 , and the counties of Augusta and Bedford, which are allowed a five-year or six-year cycle. Continue reading

Home Price Volatility and Virginia Property Taxes

Case-Schiller Home Price Index – National

by James C. Sherlock

Housing prices have more than doubled since 2012, reflecting shortages of supply and the resulting speculation. The increasing slope of those curves above is not comforting.

Prices have soared over 20% in a year. Mortgage rates are up. What could possibly happen next? Most can figure that out.

But this article is about the effects on local government property taxes of what most predict will be extreme volatility in the housing market going forward.

How are Virginia real property taxes adjusted to mitigate the effects on both property owner tax bills and government receipts in this boom and very likely bust cycle?

We’ll look at the law. Continue reading

Fix One Thing — School Physical and Electronic Security

by James C. Sherlock

I offer an apolitical suggestion. We know how to begin to fix school security.

Do it.

Step 1. Every school division has a security instruction. How many of them monitor whether that guidance is being followed? I will let them answer that.

Step 2. The more complete solution is deployment of integrated combinations of physical and electronic security systems. System integrators who specialize in school security can help with requirements definition for any facility and tailor expandable solutions to budgets. That is their business and they are good at it.

As an example of what is possible, see ADT’s integrated intrusion security and fire detection and alarm system offerings for K-12 schools.

When people say “do something”, this is the kind of solution on which all of us can agree. Do it. Continue reading

Personnel Shortages that Plague Virginia’s Health Facilities Inspection Staff in the Hands of Budget Negotiators

UVa Hospital

by James C. Sherlock

One of the most important responsibilities of Virginia state government is to inspect medical facilities and home care providers to ensure we are safe when we enter their care.

It continues to fail in that responsibility thanks to years of Virginia budgets that have consciously ignored the need for increased inspector staff and increased salaries with which to competitively hire that staff.

I have reported for a long time that the staffing of the Virginia Department of Health (VDH) Office of Licensing and Certification (OLC) is scandalously deficient. Based upon an update today from OLC, it remains so.

That organization has only half of the inspectors it needs to carry out its defined responsibilities.

Those highly skilled and very dedicated people, largely registered nurses, are asked to do every day for Virginians what we cannot do for ourselves and what our elected representatives have refused for decades to properly fund them to do.

Think of that next time you use the facilities and home providers they are required for your safety to inspect.

We hope the current General Assembly budget negotiators keep it in mind for themselves and their families.

Or the Governor sends the budget back until they do. Continue reading

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