Category Archives: Finance (government)

The State Tax Gravy Train Accelerates

by Steve Haner

First published today by the Thomas Jefferson Institute for Public Policy.

Any claim that Virginia cannot reduce taxes on its citizens without damaging state programs has been further eroded by two recent announcements.

The explosion of revenue from recent state tax increases is continuing into this new fiscal year, pointing to a potential repeat of last year’s $2.6 billion general fund surplus, which the state’s leadership is still trying to attribute to anything but its tax legislation. In the first three months of this new fiscal year general fund revenue is running $570 million ahead of last year’s record amounts, blowing out projections that assumed last year’s surplus was pandemic-related lagniappe.

The flood of money wasn’t related to the pandemic, not totally. It was related to tax policy decisions made in 2019, 2020 and 2021, the bulk of the surplus revenue coming from higher individual and corporate income taxes.

Adding to that, the Virginia Retirement System told legislators Monday that it has done so well with its investments (a 27% return in one year), the next General Assembly will be able to reduce the amount of cash it invests in the next few years, a significant reduction in annual costs. Continue reading

Of Course Tax Hikes Grew the State Surpluses

Senate Finance Committee data illustrated the expected state revenue boost caused by 2017 federal changes. Predicted and seen in 2019 and 2020, it carried over into 2021.

by Steve Haner

At Tuesday night’s debate Democratic gubernatorial nominee Terry McAuliffe dismissed the 2021 $2.6 billion general fund revenue surplus as entirely due to extra federal COVID relief funds, which is absurd on its face. By definition, every dollar is general fund state tax revenue. It came from some form of state tax.

Why do Virginia Democrats continue to deny that recent state tax law changes are in part responsible for almost-embarrassing large cash surpluses recently announced? At the time the deeds were done, nobody was denying the big revenue impacts. The really big hit was a totally bipartisan decision, so Democrats can share the credit or blame.   Continue reading

The Goochland Revolution: Making Growth Pay for Itself

Goochland County’s location within the Richmond MSA

by James A. Bacon

Ken Peterson, a leader of Goochland County’s turnaround from fiscal basket case to bearer of a AAA bond rating, thinks he has discovered the holy grail of fast-growth county governance: how to make development pay for itself.

In previous posts I described how Peterson and his fellow fiscal conservatives swept into power in the so-called Goochland Revolution of 2011 and began implementing strict financial discipline. The exurban county west of Richmond, population 23,000, put management systems into place that identified the Level of Service (LoS) desired for schools, utilities, roads, and other public amenities, and then set up a 25-year capital improvement plan that identified how much money would be needed to pay not only for the upgrades but the ongoing maintenance. Goochland would not fall into the deferred-maintenance trap on Peterson’s watch. To the contrary, the county has accumulated large reserves.

Skeptics might say that Peterson and his allies benefited from fortunate timing. The year 2011 coincided with the nation’s recovery from the great real estate crash of 2008. Growth in fast-urbanizing Henrico County had reached the county line and was leap-frogging into Goochland. Tax revenues gushing from the economic revival made it easy to balance budgets and keep the base property tax rate at an incredibly low $0.53 per hundred dollars of assessed value. However, one might argue, if Goochland follows the same path as Virginia’s other fast-growth counties — Fairfax, Loudoun, Prince William, Stafford — it could experience the same fiscal stresses that they have. Continue reading

Marijuana and Casino Legalization Linked to Increases in Mental Illness and Substance Abuse

Paul Krizek (D-Pamunkey Nation)

by James C. Sherlock

We know what is going to happen.

Dr. Daniel Carey M.D., Virginia’s Secretary of Health and Human Resources, will soon apply to the federal government for funding for substance abuse prevention grants.

He knows.

He plans to tell the federal government that additional people, mostly poor and Black, are going to suffer and die from mental illness and substance abuse because we legalized marijuana, casinos and sports betting.

But apparently we did it for a good cause — equity — or so some say.

The opening statement of that draft application reads:

Statewide Impact of COVID-19 Pandemic on Behavioral Health and Substance Use

The unprecedented COVID-19 pandemic and the resulting health impact, uncertainty, social isolation, and economic distress are expected to substantially increase the behavioral health needs of Virginians. Increased alcohol, substance use, including increased overdose rates are key concerns, as well as COVID-19 impacts already evident in Virginia.

Continue reading

The Goochland Revolution: Fiscal Edition

Goochland Supervisor Ken Peterson

by James A. Bacon

In February Goochland County Supervisor Ken Peterson and top county officials met with New York bond raters in the hope of winning a coveted AAA bond rating for their small, exurban county west of Richmond. Only a hundred or so counties in the United States have AAA ratings. None of them had Goochland’s tiny population, only 23,000. Indeed, to Peterson’s knowledge, of Virginia’s twelve AAA-rated counties, none had a population smaller than 60,000. Moreover, only a decade previously, Goochland had nearly defaulted on its water-sewer bonds. It didn’t even have a bond rating then. Winning Standard & Poor’s stamp of approval would represent an extraordinary turnaround.

The Goochland team gave its pitch. The S&P bond raters were quizzical. They’d never seen a county’s numbers like Goochland’s. Not only did it have an incredibly low base property tax rate and a steadily growing revenue stream, it had built financial reserves equivalent to 60% of its annual budget. Such reserves were unheard of, the bond raters said. Fifteen percent is recommended.

The county had a 25-year capital investment plan, Peterson explained, and it made a practice of setting aside funds for future building and maintenance needs. Astonished, the S&P team quipped that the company needed to create a separate bond rating for Goochland — AAA+. Continue reading

Coming to Virginia – a New State of Emergency?

Why is this man smiling?

by James C. Sherlock

The Governor’s 15-month emergency powers expired June 30, and, God, does he miss them.

From The Virginian-Pilot:

“School districts that aren’t requiring masks, including several in Hampton Roads, are running afoul of state law, Gov. Ralph Northam said Thursday.”

OK.

The bigger questions are

  • how long the governor will put up with the lack of emergency powers;
  • when he will start to follow Virginia’s Pandemic Emergency Annex to its Emergency Operations Plan; and
  • is the General Assembly even interested?

Continue reading

The Accelerating Scale of the Legislate-Regulate-Spend-and-Repeat Cycle Has Broken Government

by James C. Sherlock

Virginians – the state and individual citizens – have received over $81 billion in COVID-related federal funding. That comes to $9,507 for every man, woman and child in the Commonwealth.  Big money. 

That was Virginia’s share of $5.3 trillion in federal spending just on the pandemic (so far). A trillion dollars is a million million dollars. A thousand billion dollars.

For comparison, GDP was about $21 trillion in 2020  It is projected to total just short of $23 trillion this year.  The national debt is $29 trillion and growing. A little over $86,000 for every American. That figure does not include the $5 trillion in additional spending pending in the Congress.

Every day we spend $1 billion on interest with interest on the 10-year treasuries at 1.18% today. The Congressional budget office predicts 3.6% before 2027. Do the math. That is $3 billion a day — well over a trillion dollars a year — in interest. 

Relax. If you thought I was about to launch off on a discussion of drunken sailors, writing checks that our grandkids will have to make good, and the fact that inflation will drive interest payments ever upward, be reassured I am not.

This is about the demonstrated inability of many government agencies at every level to regulate, administer, oversee, spend and repeat with anything approaching efficiency or effectiveness.  Continue reading

Time for Amputation: NoVa Merging with “New D.C.”

D.C. Statehood. There has been a long running chorus of cries for D.C. residents to have full representation in Congress. From “Taxation Without Representation” slogans on D.C. license plates to the Biden Administration’s calls for DC to become the 51st state … this debate has gone on for a while. Most discussion devolves into pure politics. D.C. would bring two more liberal U.S. senators and a liberal U.S. Representative who can vote. People either love or hate that idea. Back in May I wrote a column on this blog about Northern Virginia joining D.C. in the 51st state.  In this column I’d like to put aside the politics and focus on the ethical considerations for making D.C. a state.

Because they’re Americans. The nearly 700,000 residents of Washington,  D.C., pay their full share of federal taxes. Residents of D.C. were subject to be drafted in times of war, fought and died in our country’s battles and are required to obey all laws passed by Congress. In other words, D.C. residents have all the responsibilities of American citizenship. However, they are not represented in the U.S. Congress. They have no senators and their one representative can’t vote. The biggest ethical reason to make D.C. a state is so its citizens have all the rights of being American, including the right to representation in Congress. Continue reading

Richmond Schools’ Flawed Data Threatens Federal Funds


by James C. Sherlock

The massive flows of federal and state funding to local school districts are based largely on data reported by the schools to their districts, the districts to the Virginia Department of Education (VDOE), and VDOE to the U.S. Department of Education.

In Fiscal Year 2018, the U.S. Department of Education sent more than $820 million to Virginia in support of K-12 education. Every dollar was allocated based on data collected and quality assured at the local, state and federal levels. 

The City of Richmond Public Schools (RPS) has massive problems that result in outsized contributions by the federal government. One of those problems — a serious and potentially consequential one — could imperil federal funding.

We will explore a recent event that illustrates that issue. Continue reading

The One-Sided Decision in the Reversion of Martinsville – the Start of a Trend?

by James C. Sherlock

The Martinsville Bulletin, perhaps the best remaining newspaper in the state for local coverage, published a must-read article on the reversion of Martinsville from city to town and joining Henry County.

Overview

Martinsville’s current city logo, above, was perhaps prescient. Martinsville has been hemorrhaging population, losing more than 18% in the past 10 years, and was financially stressed before that loss.

Reversion in Virginia is a one-handed game. The small cities hold all of the cards.

Henry County is vocally opposed but feels helpless to stop it. The Henry County Supervisors voted to skip the legal process to avoid the costs. They called the reversion MOU “the best we could hope for and voted for it to avoid years of court battles”.

They are right  What they avoided was the special court that would have overseen the reversion under Virginia law had they not come to an agreement. The county would have been a defendant in a trial.

The rules for that court specified in that law give the small cities every advantage in a trial. That same special court would have overseen the transition for a decade. Every decision.

The changes reversion portends for city and county residents are massive. Now that his has happened, does anyone think this will be the last reversion? Continue reading

Layne Going to the Dark Side

I do not know if this is good news or bad news for Jim Sherlock’s campaign, but Aubrey Layne, currently the Secretary of Finance, will be joining Sentara on July 1.  (This is about the time during an administration that Cabinet members start jumping ship.)

State Tax Harvest Under Northam Expands Again

by Steve Haner

With the release today of the April 2021 Virginia state revenue report, a correction in an earlier post becomes necessary. Overall general fund state tax collections are not up 26% so far compared to four years ago, they are up almost 30 percent. Corporate income tax collections are not up 68%, but 86% over the same period four years ago.

Your correspondent regrets the error and admits jumping the gun after the March report knowing things would become more dramatic soon. Since the essence of good communication is repetition, expect another update in a month. And as has been the case for a while now, expect Governor Ralph Northam to seek to distract the voters from what is really going on. Continue reading

TCI Debate Rages in Comments on Proposed Rule

by Steve Haner

The political wannabes in both parties and the state’s media are continuing to ignore it, but the argument over the proposed motor fuel carbon tax called the Transportation and Climate Initiative rages in comments on the proposal flowing into its advocates.

The Thomas Jefferson Institute has also launched a short video (above), perhaps just the first, to alert the public through more populist means. It features owners of two regional fuel businesses, well known as major local employers and taxpayers. Without doubt, Virginia’s membership in TCI would shrink and perhaps severely damage those businesses.

The video was actually ready to use had the 2021 General Assembly taken up the issue, but Governor Ralph Northam did not ask for legislative permission to join the interstate compact involved. The state remains involved in the planning for the cap and tax and ration scheme, now set for 2023 in the states who agree to the compact.

If put in place, all fuel Virginia wholesalers would need to buy government-issued allowances to sell gasoline or diesel, in effect a carbon tax. The amount of allowances will be frozen to prevent the any growth in fuel sales, and then decline annually to force down consumption, in effect rationing.  Continue reading

May Day Brings Virginia’s Labor Revolution

“Liberty Leading the People,” Eugene Delacroix.

by Steve Haner

Four major changes in Virginia’s labor laws delayed at the beginning of the COVID-19 recession will all take effect May 1. All were approved by the 2020 General Assembly once Democrats controlled both legislative chambers and then delayed at the 2020 Veto Session. May Day 2021 is almost here.

Minimum Wage. The 31% increase in the state’s minimum wage, from $7.25 to $9.50 per hour, will have the broadest impact. House Bill 395 and Senate Bill 7 also raised the hourly minimum wage to $11 eight months later, on January 1, 2022, and to $12 a year later on January 1, 2023.  Continue reading

Virginia Will Mandate and Hold Retirement Savings

Click here for more information on the California state-run retirement fund that inspired the Virginia legislation. Source:  Georgetown Center for Retirement Incentives.

by Steve Haner

Next week’s reconvened General Assembly session will decide whether only full time employees of Virginia’s small businesses will be pushed into a new state-sponsored retirement savings plan, or part-time workers will join them there.  Continue reading