Youngkin Team Cautious Despite Revenue Surge

Finance Secretary Cummings showed this chart to legislators this week and noted the deceleration in job growth, citing that as another reason he and Governor Glenn Youngkin remain cautious despite strong revenues. Click for larger view.

by Steve Haner

First published this morning by the Thomas Jefferson Institute for Public Policy. 

Virginia’s state budget grew 90% in the past decade, far faster than in previous decades. After adjusting for inflation and population changes, spending still jumped 4% each year, a high rate of compound real growth.  At the same time, the state continues to see explosive growth in its revenue, pointing to cash surpluses continuing for some time.

These facts emerged from two presentations to the Virginia General Assembly this week.  The Joint Legislative Audit and Review Commission (JLARC) issued its annual report on state spending growth on Monday.  That same day, Secretary of Finance Stephen Cummings reported on the revenue results from July through September, the first quarter of Fiscal Year 2024.

In just those three months, revenue exceeded the revenue estimates by more than $412 million.  Other months, with larger pots of projected revenue, are still ahead.  Should this revenue trend hold, surpluses similar to the historic surpluses of Fiscal Years 2022 and 2023 could result next June.

During the elections two years ago, Virginia’s flush financial condition was inspiring debates about tax reductions and tax reform.  Some, but not all, of the proposals went on to pass.  But with General Assembly elections just over two weeks away, few candidates in either party are promising more tax reform or reduction efforts in the next session.

Secretary Cummings openly expressed the cautious attitude of Republican Governor Glenn Youngkin’s administration.  Youngkin and Cummings last week heard their own advisory panel of economists report they expected no recession or at worst a mild one as the battle with inflation continues, but they apparently disagree.

Stubborn inflation is one reason Cummings cited, but they also are worried about the impact of the ongoing war in Ukraine, the new conflict between Israel and the terrorist army of Hamas, and the wave of strikes sweeping the U.S.

As has been the case for a while now, the strong revenue growth is mostly generated from the corporate income tax and that portion of the personal income tax paid by individuals through quarterly installments.  Those revenues are usually from people earning income from businesses or investments.  The portion of the income tax from payroll withholding is also growing, another good sign, but it is only about 1.4% ahead of projections.

Sales and use tax revenues for the quarter also showed only modest growth, but exceeded the official forecast that they would sink by almost 7%.  That has not happened so far.  For those who like details, here is the full set of financial summaries presented.

Cummings made the same presentation to the House and Senate committees that write the budget and tax rules.  He received only one or two minor questions. The “bumps on a log” response from legislators, again, is very telling during this hot election season.  The Senate Finance and Appropriations Committee in particular is dominated by senior legislators who are not running for new terms.

The JLARC report on spending for Fiscal Year 2023, and for the decade of 2014-2023, included the claim that “average growth rates” it reported were “slightly higher than in prior decades.”  Slightly?  A look back ten years to the 2013 report points to obvious acceleration.  For example, the General Fund side of the budget grew 38% in the decade ending July 2013, and then another 74% in the decade ending July 2023.

In dollars, spending grew from just over $17 billion in 2013 to just under $30 billion in 2023.  But it doesn’t seem to be causing anybody any heartburn.  Neither does the $81.1 billion total for last year.

Virginia splits things between the General Fund (GF), mainly the tax sources, and what is called the Non-General Fund (NGF), mainly federal funds, motor fuel and vehicle license fees, college tuitions and fees and state hospital revenues.  The NGF side of the budget doubled, a full 100% growth, over the last reporting period.  It went from $25.6 to $51.4 billion.

You can see the bump of massive federal funding related to the Covid-19 pandemic in the charts, but that abated substantially before FY 2023, the end point for the decade of comparison.  Because of those Covid funds disappearing, total spending for FY 2023 actually dropped from the previous year.  The Covid dollars were all part of NGF.

The report covers where the spending growth has happened, and as usual, most of the growth in spending was in just a few agencies or programs:  the Medicaid health services to the poor (11% per year), state payment to local public schools (6% per year), transportation (9% per year), and the premier universities (University of Virginia, 6% per year and Virgnia Tech, 4% per year.)  Those reflect total budgets which includes both federal funds and college tuition checks.

If we look instead at just the GF spending, the income and sales tax dollars, the pattern basically holds.  The largest increases in this category were in public education assistance (6% per year), the state share of Medicaid (6% per year) and higher education’s general account (6% per year.)  Health and education programs have gotten most of the new dollars by far and are usually the main focus of demands for even more.

JLARC actually started with the annual spending growth reports in 2002, and the first report looked at data as far back as 1981 (GF of $2.7 billion, 900% lower) and tracked 20 years of spending growth.  The trend of spending growing faster than the state’s population and faster than inflation was already well established.

Can the trend be reversed, or at least can the rate of climb be reduced?  Elections are the time when that proposition can and should be put to the voters. Otherwise inertia rules.


Share this article



ADVERTISEMENT

(comments below)



ADVERTISEMENT

(comments below)


Comments

9 responses to “Youngkin Team Cautious Despite Revenue Surge”

  1. Stephen Haner Avatar
    Stephen Haner

    https://www.baconsrebellion.com/app/uploads/2023/10/VA-Spending-Growth-14-23-JLARC.png

    So an interesting side note. If you open the JLARC report, it states the overall growth in spending was 84% for the decade. But it uses 2014 as the base, and I used 2013. Spending in 2023 was 90% higher than in 2013. I see the 84% as the calculation for nine years.

    1. James Wyatt Whitehead Avatar
      James Wyatt Whitehead

      Thank you. My feeble VT education only allows for limited understanding of the dollars and sense of Virginia’s budget. As a voter I look at it this way. Did the 9% growth in transportation spending help me? Answer. No. I sat on 66 for two hours on Monday morning. Trying to get to Dulles. Nobody wanted to pay the 12 bucks to ride 10 miles from Gainesville to Centreville on the fast lane. Did the 6% spending growth in public schools help Fauquier? Answer. No. The schools have never been in worse shape than right now. Did the increase in spending for UVA and VT help those schools. Answer. No. Still costs too much to go there. Although a substantial increase in anti semitism can be found. I am hoping the 11% increase in health care for the poor yielded something positive. But I have no way of knowing that.

      1. how_it_works Avatar
        how_it_works

        ” I sat on 66 for two hours on Monday morning. Trying to get to Dulles. Nobody wanted to pay the 12 bucks to ride 10 miles from Gainesville to Centreville on the fast lane. ”

        Might have been better to take US15 north to US50 east to VA28 North to get to Dulles.

        I really don’t think we get a good value for what we pay in taxes here.

        I am somewhat biased, though..I am not, nor have I ever been, a state employee.

        1. James Wyatt Whitehead Avatar
          James Wyatt Whitehead

          I thought about 15. But then I thought about 16 stoplights between Buckland and the other side of Haymarket. Then I thought about the bazillion stoplights on 50 between Gilberts Corner and Chantilly. Considered 659 to Braddock Road. But every Tom, Dick, Harry, Larry, Reron, and Jethro in South Riding would be going that way. I thought about 29 thru the battlefield. Then I remembered that unmerciful stoplight at the Stone House. So I sucked it up and sat there on 66. I did put on some Lawrence Welk to soothe my rage.

          1. how_it_works Avatar
            how_it_works

            I saw this on Monday at about 6:30pm. Traffic was backup bumper-to-bumper. This sign is apparently wrong all the time, and might actually be for the express lanes but it’s centered over the regular lanes:

            https://uploads.disquscdn.com/images/11559c7b8f81f8cadf167b1a84e9d93c5a1173662cd8c2d28903f9adfc0451af.jpg

          2. Matt Adams Avatar
            Matt Adams

            As a former resident of SR, I felt your pain every day for years.

    1. Stephen Haner Avatar
      Stephen Haner

      I need to give that pass thru tax issue its own column. Will do that.

  2. DJRippert Avatar

    “After adjusting for inflation and population changes, spending still jumped 4% each year …”

    Disgraceful.

    Incompetent.

    A large percentage of our state government consists of paper pushers. Administrative staff.

    Technology makes the number of people in those jobs shrink!

    Where are the overhead savings that every private enterprise in America realizes from technology?

Leave a Reply