Don’t Touch the Rainy Day Fund

Is Virginia’s FY 2008 budget picture bleak enough to justify dipping into the state’s $1.3 billion rainy day fund? Apparently, Gov. Timothy M. Kaine wants to keep that option on the table. Last month the Governor announced that Virginia was facing a cash shortfall of $641 million and ordered state agencies to cut their administrative budgets by five percent. The General Assembly leadership of both houses is urging Kaine not to touch the Rainy Day Fund, which was set up to weather major emergencies like the recession of 2002.

In the letter to the Governor, four senior Republican legislators wrote:

Key economic indicators such as employment and wage and salary growth, while softening, appear to be in line with long-term-trend growth of a maturing economy. Unlike the recession of earlier this decade, when the state actually collected less revenue, the updated revenue forecast presented by [Finance] Secretary [Jody] Wagner indicates Virginia revenues are still experiencing growth.

“We remain concerned that utilizing the state’s Rainy Day Fund during a non-recessionary period establishes a bad and undesirable precedent that suggests we can overspend taxpayer resources without consequence,” the legislators wrote. They offered few specifics on where Kaine should implement his spending cuts, but did urge him not to reduce state support for higher education while expanding the pre-K program, which would be “tantamount to raising tuitions on middle-class Virginians in order to launch a new initiative.”

Kaine spokesman Kevin Hall called the letter a political stunt, reports Pamela Stallsmith with the Times-Dispatch. “While they play political games in an election year, the governor and his team are busy making difficult choices about painful cuts in services Virginians rely on.”

Perhaps Hall didn’t like the legislators’ insinuation that the budget crunch was partly of the Kaine administration’s own making. Half the shortfall, they wrote, could be attributed to underestimating payments for the Land Preservation Tax Credit and miscalculating interest payments to the General Fund. On the other hand, Kaine deserves credit for seeking spending cuts early in the fiscal year, when cost-cutting decisions can be spread over 10 months.

Politics aside, the legislators are right: There is no justification for tapping the Rainy Day Fund during a period of economic expansion.

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2 responses to “Don’t Touch the Rainy Day Fund”

  1. Anonymous Avatar

    You’ve got to have a little sympathy for a governor who faces tight times for his one and only real budget (proposed and executed by his administration). All those things discussed in the campaign, promises to keep, and so little new discretionary money. And the end of the term almost in sight. But I would have to agree that meeting some of those promised new initiatives would be the real reason for dipping into the reserves. It’s not justified.

    Of course one of the politically-appealing promises that is being kept is spending $500 million in General Fund cash on transportation. As predicted by critics who got bashed for saying it, the GF infusion to transportation is forcing budget cuts in education and other core services. (Shh — it’s a secret.)

    How much else of HB 3202 is actually left intact? The anticipated surplus dollars of $64 million a year are gone for the short term and maybe the middle term. The estimates on the recordation taxes and grantors tax have got to be shredded (alhough that will rebound at some point.) The abuser fees are running a 102 degree fever. Kaine only has to take so much lecturing on fiscal responsibility from the General Assembly.

  2. James Atticus Bowden Avatar
    James Atticus Bowden

    Budget cuts? Cuts?

    Show me the numbers.

    last budget.
    projected revenue.
    actual revenue/expenditure.

    Where are the numbers?

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