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2010-01-10 VA State Budget - A Runaway Train

Testimony to the Fairfax County Delegation to the Virginia General Assembly
Virginia's State Budget - A Runaway Train

10 January 2010
By Arthur G. Purves
President, Fairfax County Taxpayers Alliance

Distinguished Members of the General Assembly:

My name is Arthur Purves.  I address you as president of the Fairfax County Taxpayers Alliance.

This year the General Assembly will be under tremendous pressure to raise taxes.

Some of that pressure will come from the October, 2009, Virginia Newsletter published by the Weldon Cooper Center at the University of Virginia.  It is entitled “Virginia’s State Budget – Train Wreck About to Happen.”

The newsletter has a graph showing actual and projected Virginia General Fund revenues between 2006 and 2012.  The graph shows a decline of $1.5 billion in General Fund revenues between 2008 and 2009.  For Virginia’s current two-year budget, total revenues have declined $5.5 billion since the budget was originally enacted in 2008.

The newsletter suggests that the $5.5 billion decline in revenues constitutes a train wreck.

However, the Weldon Cooper Center conveniently omitted from its graph General Fund revenues for the decade prior to 2006.

Virginia’s current budget crisis was preceded by a ten-year spending binge fueled by the dot-com and housing bubbles.  According to the Virginia General Assembly’s Joint Legislative Audit and Review Commission’s Review of State Spending:  2007 Update, between 1998 and 2007, the Virginia budget doubled, from $17.6 billion to $35 billion, an average annual increase of eight percent.  This is twice the increased needed to keep up with inflation and population. (Note:  The original report stated that the average annual increase was 6.5 percent.  This is an error and has been corrected in the online version but has not been corrected in the hardcopy report.)

The budget was a runaway train.  The Commission’s report (Table 4) states that during this period Virginia public college inflation-adjusted budgets increased three times faster than enrollment (46% vs. 15%), inflation-adjusted spending for public schools increased four times faster than enrollment (37% vs. 9%), and Medicaid spending adjusted for Medical Inflation increased four times faster than population (48% vs. 12%).  Unbelievably, public school staff increased five times faster than enrollment (48% vs. 9%).

Even after the so-called “train wreck”, Virginia inflation-adjusted revenues between 1996 and the current fiscal year have increased twice as fast as population (43% vs. 19%).  This is based on the Virginia Secretary of Finance’s December 18 report to the General Assembly.

What the Weldon Cooper Center calls a train wreck is simply revenues returning to their normal levels.  Do not raise taxes.  Instead, require the Departments of Education and Medical Assistance Services to live within a sustainable budget.

Thank you.