Category Archives: Finance (government)

“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

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