Category Archives: Finance (government)

Is DMV Hiding 26% of Virginia’s Fuel Tax?

DMV Table.  Missing is the additional 7.6 cents per gallon collected in every county and city as a “wholesale tax” but still passed on to consumers. Oversight?

By Steve Haner

The Division of Motor Vehicles website is not honestly reporting fuel taxes in Virginia on that table above. This cannot be an oversight.  Continue reading

$300 Million Bond Refinancing Won’t “Save” Higher Ed from Long-Term Challenges

If higher-ed institutions don’t address fundamental challenges, their long-term debt may not be worth much more than these Confederate bearer bonds.

by James A. Bacon

Governor Ralph Northam has unveiled a higher-education refinancing plan that will allow Virginia’s public colleges and universities to reschedule more than $300 million in debt over the next two years.

The Commonwealth of Virginia would refinance bonds issued by the Treasury Board of Virginia and the Virginia College Building Authority. Under the Governor’s plan, which requires General Assembly cooperation, institutions would make no principal payments on their VCBA bonds through fiscal year 2023; the restructuring would extend institutions’ payment plans for two years beyond their current schedule for both types of bonds.

“The COVID-19 pandemic continues to have tremendous impacts on higher education, including the fiscal health of our colleges and universities,” said Governor Northam in a press release. “Families all over the country are taking advantage of record low interest rates to refinance their home mortgages, and we want our public institutions to benefit as well. Refinancing will free up millions of dollars in savings allowing our colleges and universities to make critical investments, meet the needs of Virginia students, and continue offering a world-class education.”

The headline of the Governor’s press release indicated that Virginia institutions would “save” more than $300 million over the next two years. That nomenclature was repeated in leads and/or headlines appearing in the Richmond Times-Dispatch, Roanoke Times, and Washington Post. The initiative will do no such thing. The vast majority of “savings” would come from deferring payments on $300 million, which still will would have to be repaid. Continue reading

Job Recovery Is Not the Special Session’s Focus

This building remains boarded up, and legislators are not there (except the House Speaker and Clerk, pantomiming a real session on Zoom.)

By Steve Haner

With the Virginia General Assembly’s “Cops and COVID” special session moving into its third week, it seems likely to impede rather than assist the state’s economic recovery from the pandemic. It may also greatly expand COVID-19’s financial burdens in the years to come.

The highly publicized issues of unpaid rents and utility bills, threatening tens of thousands with choices between eviction, disconnection, or years of additional debt, are clearly related to un- and under-employment from the COVID-19 recession. But getting people back to work does not seem the top priority for legislators.

The original stated purposes for the session starting August 18 were to amend the state budget in response to the recession, and make other adjustments responding to the viral disease. Deadly confrontations between police and Black suspects in several American cities, and the violent response, added police and judicial reform issues to the agenda.  Continue reading

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.”

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

Williamsburg the Locality Most Vulnerable to COVID-19

Composite Local Vulnerability Index. Source: “Report on Local Vulnerability Analysis.” Click for larger image.

The City of Williamsburg is the Virginia locality most vulnerable to the stresses imposed by the COVID-19 epidemic on local governments, according to a report recently issued by Virginia’s Commission on Local Government. Other small cities — Emporia, Colonial Heights, and Norton — follow close behind on the list.

The Commission based its assessment on three sets of data. The first is the Fiscal Stress Index, which the state already maintains to measure the taxing capacity of local governments and the “effort” they expend in terms of taxes levied. Commission analysts also considered each locality’s dependence upon revenue sources most immediately impacted by the virus: local sales taxes, transient occupancy taxes on hotels, and meals taxes. Thirdly, they used an analysis of job loss vulnerability produced by Chmura Economics & Analytics based on a region’s mix of industries. Continue reading

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.

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

Racism, COVID19 and Marijuana Legalization in Virginia

By DJ Rippert

Unintended consequences.  Newspapers, websites and Bacon’s Rebellion have been full of articles describing and debating the COVID-19 pandemic and the police killing of George Floyd with the attendant protests. First-order consequences of these events have been widely discussed. However, as we enter into the “new normal” a number of secondary and tertiary questions arise. One such question pertains to the legalization of recreational marijuana in Virginia. My opinion is that both the COVID-19 pandemic’s economic fallout and the new sense of urgency around racial justice should compel our state government to accelerate the legalization of adult use marijuana.

The COVID19 lockdown recession. The sudden stop to Virginia’s economy has resulted in predictable fiscal turmoil. While one can debate whether the lockdown was too restrictive, not sufficiently restrictive, too long or too short there can be no debate that closing large parts of the economy has caused deep financial issues. The US economy is in recession. Some will say that Virginia will be insulated from the worst of that recession by the flow of federal dollars through the state. To that I’d reply – “don’t be naive, Nancy” … stories of the impact on small businesses are being reported across the state. It should be obvious to everybody that Virginia faces a fiscal winter even if there is no second wave of Coronavirus this actual winter. 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

Juggling the Revenue

By Dick Hall-Sizemore

Jim Bacon mentioned in an earlier post that the state’s revenues for April were $700 million less than in April of last year.  I was surprised that there were no cries of outrage from readers and dire warnings of the state running a budget deficit. I was also surprised that I did not detect any signs of panic on the part of the administration.

After I dug into the details and thought about them for a while, I realized that, for reasons to be set out later, the state is in position to finish this fiscal year in the black. It is next year that has the administration worried.

Total general fund revenues for April 2020 were 26% lower than those for April 2019, leading to the $700 million decrease. Although total General Fund (GF) revenue year-to-date was higher (1.4%) than the comparable period in FY 2019, 3.1% growth for the year is needed to meet the forecast. In summary, the state revenue growth rate through April was less than half what was needed to meet the forecast. Continue reading

Hidden, Spaced Out, Higher Taxes Coming

The green areas are regional transportation districts where additional fuel taxes are already being collected, 7.6 cents per gallon on gasoline and 7.7 cents per gallon on diesel. Effective July 1 those regional fuel taxes will be imposed in all the other Virginia localities. In combination with the 5 cent per gallon increase in the statewide gasoline tax, the total tax on fuel goes to 28.8 cents on gasoline and 27.9 cents on diesel.

By Steve Haner

First published this morning by the Thomas Jefferson Institute for Public Policy.

The 2020 General Assembly, with its new progressive Democratic majority, passed a host of changes in Virginia tax laws that will begin to hit individuals and businesses in a few weeks on July 1.  Because of the COVID-19 economic shutdown, a few amendments were made to the implementation schedule during the reconvened session on April 22, but no tax increase was repealed.

This is a follow up on an earlier report on the sixteen tax bills that passed the regular session. Most are taxes will be buried almost invisibly in various transactions, and their phased imposition will also keep many taxpayers from noticing them.

July 1, 2020

The statewide tax on gasoline increases from 16.2 cents per gallon to 21.2 cents per gallon (a 31% increase) and is no longer tied going forward to the rise or fall of wholesale cost.  Continue reading

WTJU Podcast: COVID-19 and the Economy

By Peter Galuszka

Here’s is the twice-monthly podcast produced by WTJU, the official radio station of the University of Virginia. With me on this podcast  are Nathan Moore, the station general manager, and Sarah Vogelsong, who covers, labor, energy and environmental issues across the state for the Virginia Mercury, a fairly new and highly regarded non-profit news outlet. Our topic is how Virginia is handling the economic fallout from the COVID-19 pandemic.

Screwing Workers On Safety and Liability

A GRTC bus driver in better times

By Peter Galuszka

At 4:30 a.m. on April 27, about 100 workers of the Greater Richmond Transit Company — half of the total – failed to show up for work.

Worried about the health of its membership, Local 1220 of the International Amalgamated Transit Union demanded additional safety measures such as full personal protection equipment, time and a half hazardous pay, limits on the numbers of passenger and testing.

GRTC management threatened to fire workers who stayed away from work but agreed to talk. A resolution may come at a May 19 board meeting.

Indeed, stories are showing up throughout Virginia and across the country as workers most likely to be exposed to COVID-19 often have the least protection and no guarantees their employers will provide testing, hospitalization and sick pay.

In Timberville near Harrisonburg, workers at a Pilgrim’s Pride poultry plant worry that they are required to work at less than six feet –- considered safe distancing –- from each other. In Norfolk, non-union workers at a General Dynamics ship facility were required to do electrical work until they refused, citing exposure threats and a death. Continue reading