Category Archives: Finance (government)

Richmond Parents and Taxpayers, Welcome to Chicago Public Schools

by James C. Sherlock

The gulf between what the City of Richmond School Board (RSB) and the Richmond City Council (RCC) on what will be negotiated with their public unions is actually an ocean.

The RSB has authorized the negotiation of virtually everything about how the schools are run. It leaves nothing off the table except the right to strike and the right to negotiate a closed shop (Virginia is still a right to work state), both of which state law still prohibits. But the unions can negotiate what are essentially the work rules of a closed shop.

In contrast, the City Council is poised to pass an ordinance on May 5th from two candidate drafts, one from Mayor Stoney and the other from three Council members. The Mayor’s version states what will be negotiated — pay and benefits. The other states what will not be negotiated with an eleven-point description of the City’s Rights and Authorities.

The City Council drafts, especially the Mayor’s, have it right. They note the City Council’s duties under the laws of Virginia and to the citizens of their city.

Not so the school board. The RSB resolution acknowledges only one stakeholder: its unions.

Unmentioned in the RSB resolution is exactly who is going to represent the city in its negotiations with its unions. Ideally it will be a team composed of City Council (finance) and School Board subject-matter experts. If so the city reps will be operating under two sets of negotiating rules in direct opposition to one another.

I’d buy a ticket, but maybe under the sunshine laws negotiations will be on TV. Continue reading

How Do We Pay to Fix the Schools?

Virginia Middle School in Bristol — built in 1906.

by James A. Bacon

It has long been recognized that some of Virginia’s public schools are in scandalously poor condition — leaky roofs, mold, asbestos, outdated HVAC systems, clogged toilets, and so on. More than half of all school buildings in the state are greater than 50 years old. In mid-2021, school districts across Virginia had identified $9.8 billion of projects in their Capital Improvement Plans. Replacing all buildings 50 years or older would cost $24.8 billion, according to a Virginia Department of Education needs assessment.

As Radio IQ points out in an article today, Virginia engaged in a wave of public school construction in the 1950s and 1960s, and those buildings are aging out. No one knows where such funds will come from. Some counties are affluent enough that they can raise property taxes to cover the cost of issuing and paying off bonds. Some counties aren’t. The General Assembly is debating how to help, whether by providing half a billion dollars in grants or up to $2 billion in loans, reports Radio IQ.

Here’s what makes any discussion of state bail-outs tricky: some localities have been proactive, either raising taxes or setting aside reserves, while others have kicked the fiscal can down the road. There is a danger that a massive, statewide infusion of state funds into local school districts will subsidize the improvident and leave the prudent short-changed. Continue reading

Causes of the School Funding “Crisis”

Courtesy Wise County Public Schools

by James C. Sherlock

Read the story, “House and Senate lay out dueling visions for education funding in Virginia,” in the Virginia Mercury this morning by the reliably thorough Kate Masters.

If you follow it, you, like everyone else in Virginia, can pick a side or pick provisions from both houses that you prefer.

What you won’t find in either budget version is an attempt to tackle the massive amounts of money that are wasted in plain sight. Much of the waste is attributable to faulty or non-existent assessments of need and misplaced local priorities.

The rest is traceable to the self-serving inputs of the schools of education, which have owned and operated the Virginia Department of Education (VDOE) for years. Continue reading

“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