April 17, 2013
Trending: Virginia’s Slow Revenue Growth
The recent announcement that state general fund revenue declined six percent in March compared to the same month last year might be of little concern were it not part of a larger trend for Virginia. The troubling fact is it’s been almost four years since the official end of the recession and state revenues are running only about seven percent above 2009 levels.
How slow is that? At this same point after the 2001 recession, Virginia’s revenues were running about 27 percent above pre-recession levels.
State revenues recovered more quickly after the 2001 recession because the downturn was less severe and Virginia lawmakers enacted a tax reform package in 2004 – just two years after the official end of the recession – that boosted revenues to meet the state’s needs for funding education, health care, public safety and other services – which, in turn, strengthened the economy.
This time around, the downturn was markedly deeper and lawmakers did little to boost revenues until this year’s transportation legislation that raised sales and excise taxes – four years after the official end of the recession. And since almost all of that money is earmarked for transportation, rather than services such as health care and education that are funded by the state’s general fund, even it will do little to bring Virginia’s general revenue growth up to a reasonable post-recession growth rate.
The slow pace of this economic recovery has meant fewer dollars to support the growing needs of a growing state like Virginia. It’s clear that lawmakers need to consider other revenue sources to keep us from falling further behind.
–Laura Goren, Policy Analyst