The 20% Growth Claim Is Not Misleading

By Steve Haner

As I noted earlier, defenders of state spending growth have a number of tools and tactics handy to confuse voters, but facts are stubborn things.  So, I’m going to explain a bit further how this proposed budget grew 20% over its predecessor in just one two-year cycle, with some context. The table above should help.

Virginia sets its state budget for two years at a time, with a new two-year spending plan introduced in December of every odd-number year and considered in the session that follows in the even numbered year. 2020 is a budget year. For convenience, the bills are always House Bill 30 and Senate Bill 30. In December, Governor Ralph Northam did as his predecessors have done for decades and published his budget.

In the opening summary, known as the enacting clause, there are tables that always end with a grand total for all proposed spending from any and all categories. The number I’m using is right at the end of that. Note, I am not using the higher revenue estimate – just the proposed appropriations.

The introduced budget is just that, and the General Assembly will change it. It will add new spending based on higher revenue estimates (or cut, if the estimates collapse in the February recalculation.) It may create new revenues by changing tax laws or creating other revenue streams, as happened with the Medicaid expansion funded by new assessments on hospital revenues.

It is just as valid to compare approved budgets to approved budgets, and measure growth that way. We won’t have an approved budget for the upcoming biennium until this Assembly completes its work, and then a comparison to the same product from the spring of 2018 would be valid. But it is fair to compare introduced budgets, as well. Likewise, it would be fair to compare actual spending, not known until the books are closed at the end of the cycle and compiled by the Comptroller of Accounts.

The introduced and approved budgets and final spending report always vary, sometimes significantly. For this discussion, to get that apples-to-apples comparison, I’ve stuck with the introduced bill. Because it is a two-year process by design, I do resist trying to track this on an annual basis.

The rough and rounded chart above shows five cycles, the base in 2010 followed by growth amounts for 2012, 2014, 2016, 2018 and now 2020. It also shows cumulative growth since 2010. Growth happens in most cycles, but clearly this bill shows higher growth than the previous four. Too much higher? That’s your decision to make. Unjustified? Also, not a judgment I am asserting at this time.

Does it include federally-transferred revenues related to Medicaid and other entitlement programs? Yes. Higher revenue collections by the state hospitals and the higher education system? Yes. Does it also include specific tax increases?  Yes – a new cigarette tax, higher transportation taxes, a new tax on gaming devices, and whatever the collections will be from those hospital provider taxes that didn’t exist two years ago. It also includes the uncounted hundreds of millions the state will reap because it tracked most changes to tax rules made by the federal Tax Cuts and Jobs Act, but made few adjustments to protect taxpayers from the impact. That alone was a huge state tax hike.

Given those changes in the past two years and the new taxes included, it is no mystery why this is such a higher starting point for the next budget cycle. When there is an approved budget come April, it is likely the number in that amended enacting clause will blow past $140 billion. Here endeth the lesson.