State Budget Bacon Bits: Reserves and R&D

And now for the some other interesting elements of Virginia’s new $117 billion two-year state budget, because Medicaid expansion sucked all the wind out of the room (understandably.)  The House Appropriations Committee added this summary presentation yesterday while the Senate members were filling up their Facebook and Twitter accounts with Riveting Speeches before delivering votes everybody expected.

Reserve Funds.  By the end of the 2020 fiscal year, 25 months from now, the projection is for just under $1 billion split between the traditional Rainy Day Fund and the more flexible reserve fund.  To fatten the projected balances, intended to placate Wall Street analysts getting antsy about the state, some scheduled deposits into a water quality fund may be held back.

The Rainy Day Fund is controlled by constitutional provisions and can only be tapped when revenue projections fall short.  The revenue reserve is simply an exercise in legislative and executive discipline but I think is there to protect the state if expenses exceed projections.  It is a subtle point but perhaps important because of hard to predict programs (such as, drum roll, Medicaid expansion.)

R&D Taxes.  It has already been noted that the budget included language to create the hospital provider taxes funding the Medicaid expansion, bypassing the usual legislative process for considering tax bills.  There another tax change buried in there, this one creating a sales tax exemption for research and development expenses at federal facilities.  What I don’t see anywhere in the budget is a provision to capture the savings from eliminating the House Finance Committee, which is obviously now redundant.

The Lottery Is For Education!  Three decades in people still believe that their lottery losings are great for public education.  No, it supplants other tax dollars and does not supplement them. Losing tickets free up a sales tax or income tax dollar for something else.  Because this final bill is so late, lottery profits projections could be increased based on additional weeks of data and see how that is reported.

HAC Staff Note

Yes, the money is now packaged differently and state budgets now include the Supplemental Lottery Per Pupil Amount (PPA). This budget increases the PPA totals with great fanfare.  I remain unconvinced that public education funding would be different if the lottery disappeared, but lower priority items might suffer.  The irony of funding schools with a tax on the mathematically challenged marketed by pretending money isn’t fungible never ceases to amuse.

Teacher Raises.  There is money included to provide the state’s share – and that percentage is very low in some localities – of a 3 percent raise for local teachers.  The raise is not scheduled until the 2019-2020 school year and that may or may not be enough to keep the red shirt protesters away from Capitol Square in coming months.

The approved raise amount for state employees and other state-supported local employees is 2 percent, also scheduled for the summer of 2019, but there is an added two percent for state employees with three years of service.   A cynic might note that scheduling the raises for Year Two keeps the positive headline intact and delivers the raise before the 2019 election, but cuts the total cost in the budget substantially.

My Personal Favorite.  I loved the following bullet point: “$333,333 GF the first year and $381,600 GF the second year pursuant to HB 883/SB 20 establishing a three-year regulatory reduction pilot program (Dept. of Planning & Budget).” Next year we can figure how much it cost us per reduced regulation.

GTT.  I will be back on the blog in a week.  Might hit the Alamo again this time so the following quote came to mind.  We do plan to visit their Capitol.

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One response to “State Budget Bacon Bits: Reserves and R&D

  1. What is interesting is the lack of addressing the complaints about state workers and the 27% lower pay they have. That is already showing effects.

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