Damn the Coronavirus! Full Speed Ahead!

Source: Department of Planning & Budget revenue forecast. Click for more readable image.

The budget forecasts underpinning Virginia’s General Fund budgets for FY 2021 and 2022 suggests that revenues will increase 4.5% next year and 3.7% the year after that. Secretary of Finance Aubrey Layne released those numbers back in December, when COVID-19 was still an obscure disease incubating in a Wuhan wet market. But it’s a very different world today. Nations are shutting down travel and enforcing social distancing. Economies are slowing. Retail sales are suffering. Economists are revising growth forecasts downward. Speculation is rampant that the global economy could enter a recession, dragging the U.S. down with it.

None of these developments appeared to make the slightest impression upon Virginia General Assembly leaders as they finalized changes to the budget submitted by Governor Ralph Northam. Read Dick Hall-Sizemore’s recap of the legislature’s budget actions here. Like junkies reaching for the needle, spending-addicted legislators paid no heed to their surroundings. They made no accommodations whatsoever for the impending epidemic.

Republican lawmakers did propose a delay in adopting the budget on the not-unreasonable grounds that the rapidly changing situation could have a big impact on revenue forecasts. Democrats responded that a delay would create unnecessary uncertainty.

As Admiral Farragut famously said, “Damn the torpedoes, full speed ahead!” That dare-devil approach worked out for the Civil War commander in the Battle of Mobile Bay. We’ll see how it works out for Virginia in the Battle of the Coronavirus.

— JAB 

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9 responses to “Damn the Coronavirus! Full Speed Ahead!”

  1. djrippert Avatar

    In what should surprise nobody who reads this blog other states are already taking action …


    For example …

    “While tapping the emergency fund, Washington state lawmakers also pared back some proposed spending, allowing the state’s reserves to continue to grow in case the coronavirus causes more budgetary hardships.”

  2. Steve Haner Avatar
    Steve Haner

    Sales tax revenue is likely to spike first, of course, based on the panic binge shopping of the last four or five days. On-line commerce might remain strong, but eventually the empty stores, restaurants, hotels and resorts will put a major crimp in sales tax collections. First in April and then big time in May and June, the final two months of this state fiscal year. People who ran out of the stock market with their hair on fire will have gains to report and tax initially, but eventually that revenue source will also collapse late in this fiscal year and early in the next one. The big hit, however, will be from major layoffs if they occur, not just in the travel and leisure field but in the rest of the economy. Say the shipyard does a two week or longer shutdown….(let’s hope that’s nuts….). Not sure of the lag on payroll withholding taxes, but say the depth of that hits with the June-July payments.

    Key metric: weekly unemployment claims.

    But Scott Gottlieb was on CNBC this morning predicting the schools stay closed until the fall, summer camps etc are closed, and the summer will still be be problem-filled, and mentioned for the first time that there is every reason to expect a new wave in the fall. By then it may be clear that shutting down the entire economy was not the best move. All for a disease where half of those infected show no symptoms, most who get sick might as well have regular flu, and most who die were just as vulnerable to a host of other dangers. But we’re off down this path….

  3. TooManyTaxes Avatar

    Common sense would direct state and local governments to toss their rosy economic assumptions and budgets based on such assumptions. They need to plan to spend money in new ways and cancel most new programs that don’t address the coronavirus and related economic and social aspects. Money should be put in reserves until needed. Legislative bodies should be recalled and they should set aside any significant new fees and taxes until this mess works its way through.

    Maybe this is karma for those newly elected officials who have promised to change the world with other people’s money.

    1. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      The problem is no one knows what revised assumptions should be used. The GA did put an additional $182 million in a reserve fund that now has over $300 million that can be tapped at any time. Then there is the $2 billion Rainy Day Fund, some of which can be drawn down if revenues decrease more than one percent of the forecast. A large chunk of the new taxes enacted by the recent GA was for transportation. No one would be happy about setting that aside. Another “tax” that Steve identified is the carbon tax through RGGI. That has not been implemented yet and, as I understand it, and I don’t think it has been decided how the revenue will flow. More than half of the new taxes were local option taxes, which will go to local governments and not the state. In the end, calling the GA back into session would not do much good at this point, because there is not a whole lot of new taxes and fees to set aside.

  4. johnrandolphofroanoke Avatar

    Virginia’s leaders might echo the cry of Admiral Farragut. But if they are not careful, Virginia’s leaders might end up like Admiral Buchannan. He commanded the ram Tennessee and did quite well until Farragut’s cannon blasted away the rudder chains on the ram.

  5. Obviously we need to be even fuller speed ahead on off shore wind to boost the state economy which could soon be in shambles.

  6. With a headline like that, I thought your post was going to address Jerry Falwell’s keeping Liberty U. open (because it’s all just a hoax, a conspiracy to discredit the President).

  7. TooManyTaxes Avatar

    https://comptroller.nyc.gov/newsroom/comptroller-stringer-city-must-take-immediate-action-to-prepare-for-economic-impacts-of-covid-19-and-protect-vital-services-for-most-vulnerable-new-yorkers/ What will Jeff McKay do?

    How will raising the gas tax five cents (especially while ignoring permit fees for overweight trucks) help get the state economy going? The tax increase should be postponed until the economy starts perking again.

    1. Assuming possibly $1 gaso which is my prediction (not necessarily for Va.) maybe 5 cents is not so bad?

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