May 3, 2016
Virginia’s New Budget: A Small Step On a Long Climb Out of the Hole
Virginia’s growing economy has provided state policymakers with some much-needed additional resources to invest in our state’s schools, families, and communities. Policymakers expect to have $3 billion more in state revenues over the next two budget years than in the last two budget years.
Even after adjusting for the rising cost of providing the same level of services to a growing population, the state should still see some real progress towards climbing out of the hole brought about by the lean years of the recession and federal budget cuts.
The governor and legislators provided public education – including the state’s pre-K-12 schools, colleges, and universities – with the most new general fund operating money. Although it could have been better targeted to the highest needs areas of the state, this new money will help relieve some of the cost burden that lawmakers transferred to Virginia’s local governments, students, and their families through recession-era cuts. This starts to return some balance to Virginia’s education system, which has traditionally been a partnership among the state, local governments, and tuition-paying public college students.
Policymakers are also making some improvements in meeting the state’s needs in other important areas. For example, they are helping to improve the availability of intensive in-home care services for individuals with serious intellectual and/or developmental disabilities, and they are properly funding the state’s public employee retirement system.
But Virginia’s level of state investment in its families and communities remains well below where it has been and needs to be to ensure a strong economic future for all Virginians. For example, Virginia’s families face larger class sizes, higher college tuition, and, in many cases, increased property taxes as local governments shoulder more of the cost of public education. That’s because the state for too long has chosen cuts over revenues that would fund investments for the common good.
State general fund operating spending across the two year budget will still be $7 billion below 2007 levels after adjusting for the growing cost of providing the same level of services to a growing population. That’s more than $3 billion a year in reduced spending, a cut of more than 15 percent. A big part of the problem is the failure of lawmakers to update Virginia’s tax code in ways that would help average people instead of powerful interests: Virginia’s basic income tax structure has not been touched since 1987, meaning the wealthiest pay less than they should. Key changes in business practices and the creation of numerous special tax breaks have outstripped the ability of the corporate tax to accurately reflect today’s business activity and produce the revenue that it would bring in if it did so. The shift in consumer spending from goods to services has eroded sales tax collections. As a result, state general fund revenue as a share of the economy has eroded. For example, if state revenues as a share of state personal income were back to the levels Virginia saw in the mid-2000s, it would provide over $2 billion a year to invest in the building blocks of a strong economy.
Better economic times are good news for Virginia’s families and the state’s ability to invest in what’s needed for the future. But too many families and communities are still being left behind. State policymakers should do more to make sure that the state has the resources to build a commonwealth where everyone, in all parts of the state, has the opportunity to succeed.
Budget & Revenue