Last week, Gov. Ralph Northam announced that Virginia finished the fiscal year with $551.9 million more in revenue that we projected when writing this year’s budget.
First, the good news is that most of this surplus is due to increased tax revenue from payroll withholding taxes, not one-time revenue sources like capital gains or tax avoidance strategies related to the recent changes in federal tax laws. The Virginia economy has truly started to perform again.
However, it is important to keep these numbers in context. The state’s General Fund has been under significant stress over the decade since the Great Recession and automatic federal spending cuts caused by a process called a “sequester.” In the nine years I have served in the General Assembly, this is the second fiscal year that the Commonwealth has experienced revenue growth equal to or greater than the historical average.
Because of our state Constitution, other state laws and the budget, all of these “new” funds are already allocated. Our laws require that 10 percent or $55 million go to the Water Quality Improvement Fund and that the $500 million balance be contributed to Virginia’s Revenue Stabilization (“Rainy Day”) Fund, which before the 2018 General Assembly session had dropped to historically low levels due to frequent, sluggish revenues. Bond rating agencies had also expressed concern about the lower balances and had indicated that our AAA bond rating could be adversely impacted without significant contributions.
While everyone would love to have a tax cut, the General Assembly has enacted dozens of tax cuts over the past two decades, including car tax relief, estate tax repeal and removing the sales tax on food. These tax cuts have completely offset the effect of any tax increases that passed. As a result, most General Fund programs have been starved.
Here are some examples.
Virginia’s per pupil, elementary-secondary education expenditures are the 15th lowest in the nation and our teacher salaries are the 13th lowest. Virginia’s meager state-funded preschool program is still in its infancy.
Virginia theoretically set a goal for the state to support 66 percent of the cost of attending college, funding that actually existed when I attended James Madison University from 1989 to 1993. The state now only covers about 33 percent of the cost. This has caused tuition at our state-supported institutions to skyrocket so that tuition rates at these colleges have become the fourth highest in the United States of America.
There are 10,000 families on Virginia’s waiting list for Medicaid waivers. These are families with fully disabled juvenile and adult children who are incapable of living independently. A Medicaid “waiver” allows them to live at home or in group homes funded by the Commonwealth. Many families, such as military families, move to Virginia only to learn that our state is not supporting these services, services that are basic in most states.
State employee salaries continue to lag behind the private sector. Recent reports have concluded that state employees would need a 26 percent pay increase to reach private sector parity. State attorneys’ salaries are 90 percent lower than comparable private sector salaries. Until this year, the Virginia State Police had not had any new trooper positions authorized in over a decade.
Environmental enforcement in Virginia is severely limited by inadequate staffing. Former Gov. George Allen cut employees by 20 percent during his term and the Department of Environmental Quality has never recovered. We struggled to find funds this year to pay for actual staff at the newly-created Widewater State Park in the 36th District. The state has been sitting on the 1,000 acres for 30 years but has not had the money to open the park.
Transportation is funded entirely separately by completely different streams of taxes mainly related to transportation such as gas taxes, annual fees and sales taxes on vehicles. We were only able to restart maintaining our roads and investing in new transportation projects after we increased taxes in the 2013 General Assembly session.
At the end of the day, the new funds are good news, but there are dozens of state-funded programs which are desperate for fresh funding. Please continue to provide your feedback as to how we should prioritize spending if we are fortunate enough for revenue to continuing increasing. You can reach me at scott@scottsurovell.org.
It is an honor to serve as your state senator.