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Sustaining Virginia’s Future

Of all the sources of information I cite in my weekly columns, none is quoted as frequently as The Commonwealth Institute for Fiscal Analysis (www.thecommonwealthinstitute.org). The institute is an independent staff of professionals who do analyses of state public policies with particular attention to the impacts on low and moderate income persons. Their July 2012 report, Frozen in Time: Virginia’s Revenue System Can’t Pull its Weight, provides the documentation for this column.

In spite of the quarterly references in the news media that imply Virginia has a budget surplus, the fact of the matter is that, according to The Commonwealth Institute Virginia’s investment in education, transportation, and health care, it falls about $4.8 billion short compared to pre-recession levels. Far from having a budget surplus when revenue collections exceed projections, Virginia has actually had a budget shortfall in 10 of the last 12 years ranging from $214 million to upwards of $2 billion according to the institute’s analysis. The shortfalls have been masked by shifting costs to local governments, to parents through higher tuition rates, and to the use of federal stimulus monies. But the cracks in the system are starting to show as transportation congestion increases with inadequate funding for improvements, tuition fees are steeper than some parents can pay, and our mental health system continues to be inadequate.

The institute calculates that fully taking into account the state’s growing population and the rising costs of providing key services, the Virginia legislature between FY 2007 and FY 2013 has under-funded K-12 education by $1.3 billion, health and human services by $512.2 million, and public safety by $326.1 million. The core of the problem as the report states is that "Virginia has serious structural problems in the way we raise the resources needed to provide for public services."

During the same time period of FY 2007 to FY 2013 Virginia’s general fund revenue as a share of personal income dropped from 4.7 percent to 4.16 percent. That drop alone cost the state about $3.86 billion dollars. On the revenue side of the budget, The Commonwealth Institute concluded that "clearly Virginia has the capacity to do more with revenue generation to meet the needs of the state’s families and workers. By addressing structural flaws in three key areas—the individual income tax, the corporate income tax, and the sales and use tax—we can make the state’s system more productive and responsive to the 21st century economy."

I invite others to review the report and challenge its findings and conclusions. Otherwise, to sustain the Commonwealth in the future we will need to heed its recommendations to deal with the structural problems of the budget. That in part means addressing the adequacy of state revenues.