Yippee, Virginia Can Borrow another Half Billion!

The Commonwealth of Virginia can issue another $467 million in debt in FY 2012 and a like amount in FY 2013 without undermining its AAA bond rating, reports Debt Capacity Advisory Committee in its latest guidance to the Governor and General Assembly.

Under the committee’s guidelines, debt-service payments cannot exceed 5% of annual “blended” revenues (which include General Fund revenues, Transportation Trust Fund revenues, ABC profits and other, smaller revenue sources).

State debt has more than doubled in the past six years, increasing from $5.8 billion in fiscal 2005 to $11.9 billion in fiscal 2011, reported the Loudoun Times in November. Annual interest payments have increased even more rapidly, from $236 million in 2005 to a projected $593 million in 2012.

Before someone in the McDonnell administration or the General Assembly comes up with a bright idea for how to exploit that unused debt capacity, let’s make sure we get off-the-books debt paid off first. Like unfunded obligations to the Virginia Retirement System and borrowing from the federal government to maintain the Unemployment Trust Fund.

Speaking of the Unemployment Trust Fund, which hasn’t garnered much attention, here’s the latest report filed by the Virginia Commission on Unemployment Compensation. The state  borrowed $668 million from the feds since the recession in order to continue paying unemployment benefits and is expected to borrow another $196 million by April 2013. Virginia is expected to repay the outstanding balance by May 2012. “However,” states the report, “Virginia is expected to resume borrowing for the first four months of 2013. In May 2013, these funds will be repaid by a final $70 million payment. ”

Let’s not push our luck, I say. Let’s make certain we can meet our existing obligations before we take on any more.


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6 responses to “Yippee, Virginia Can Borrow another Half Billion!”

  1. I smell a rat. Where are the numbers? How much do we owe for unfunded liabilities? How much will we be on the hook for – for MediAid? And why are we borrowing money from the Feds while our Gov and Cantor are berating the Feds for extending unemployment monies for the states – like Va?

    How come Dems like Kaine and Warner get hammered for tax increases and folks like McDonnell get a free ride by hiding tax increases that come by borrowing, hidden fees, and stealing from the sales tax for education to pay back transportation borrowing?

    Where are all the critics of Kaine and Warner here in BR when McDonnell gens up his own version of a Ponzi Scheme?

    Methinks if McDonnell was a Dem that Jim Bacon would be mid-stream in a grand maul hissy-fit.

    tell the truth. Wasn’t Kaine and Warner fundamentally more honest about their tax increases than McDonnell is about his?

  2. Where is Bacon on McDonnell’s fiscal policies?

    Larry, You comment a lot on the BR blog (thank you) but do you actually read what I write? Can you name a single blogger who has done more to highlight Borrowing Bob’s affinity for debt than I have? Can you name a single blogger who has done more to urge the state to embrace more cautious fiscal policies?

  3. never-the-less I think had Kaine or Warner done this your reaction would have been far stronger…

    tell me I’m wrong.


  4. DJRippert Avatar

    Comparing McDonnell to Warner seems fair. Warner claimed, in thirteen public appearances during the election, that he would not raise taxes. Then, one elected, he declared that he really never understood the state’s finances and would have to raise taxes after all.

    McDonnell claimed throughout the election that he would not raise taxes. His opponent, Creigh Deeds, said that he would raise taxes at about the three quarters mark in the campaign.

    So far, McDonnell has not raised taxes and his increases in fees are fairly inconsequential. However, he seems to be taking on debt through both overt and covert means. I suspect that some future governor will run for office promising not to raise taxes although that candidate will know that taxes must be raised. Then, after the one-term election, that governor will raise taxes. I call this the Warner Shuffle. In the case of the governor who must deal with Borrowing Bob’s legacy – he or she will indeed need to raise taxes.

    Kaine is a separate question. He just struggled throughout his tenure as governor. It wasn’t about taxes or debt. It was about Tim Kaine’s ability to get much of anything done.

  5. Kaine got pre-school funding that McDonnell has taken away.

    Kaine had Phillip Schucet that instituted some reforms at VDOT.

    Kaine also supported HB3202 that instituted some land use reforms and also this:

    “House Bill 3202 raises new, dedicated statewide sources of revenue for transportation. Through a mix of bonds, new taxes and fees, and other revenue sources, more than $500 million in additional funds will be available each year for transportation maintenance and improvements. Please click here (pdf) to see six year revenue projection.”


    the abuser fees were quickly done away with much other parts of 3202 survived..and in fact, McDonnell is utilizing some of the fees approved in 3202 to leverage loans.

    but you’ll get a chance to decide which past Va Gov you think should be a Senator, eh?

  6. You will never get a better interest rate, borrow it quick and spend it on something valuable……. not programs.

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