Last month, Gov. Terry McAuliffe announced that state revenues were lower than assumed in our state budget passed earlier in the year. This creates a series of difficult choices.
In July, the Governor announced that the budget ended on June 30 and came in $266 million short of expectations. Last month, the Governor announced that due to continued lagging revenues, the current budget was projected to be short by $850 million this year and $630 million in next fiscal year. This creates a total $1.7 billion from what was budgeted last session.
There are many causes of this. First, the lingering effects of the Sequester — automatic spending cuts by the federal government — continue to stall the Northern Virginia and Hampton Roads economies. Cuts to defense spending alone took $9.8 billion and 115,000 jobs out of the Virginia economy. Income tax collections are down, even with 2.6 percent job growth last year, because new jobs do not pay as much as the jobs we have lost. Commercial office vacancies are still at record highs in Northern Virginia.
Sales tax collections also continue to lag as more people buy their goods online — transactions that Virginia cannot tax.
The Governor has authorized the withdrawal of $378 million from Virginia’s Rainy Day Fund. This will alleviate half of the shortfall for this fiscal year and last year, but state funds designated for teacher and state employee salary increases were required to be withheld by state law — the Governor had no discretion about this. The remainder will be made up with budget cuts.
In seven of the eight sessions I have served in the legislature, budget revenues have lagged the historical average increase.
In addition to an economy over-dependent on federal spending, Virginia’s budget continues to suffer from a structural deficit created by a 1920’s tax system being applied to a 21st century economy. Virginian’s pay some of the lowest income taxes in the United States, the repeal of the Estate Tax has cost Virginians about $2 billion since it was repealed and our ability to collect the sales tax on internet sales is limited by the Federal Government. We also continue to leaving billions of free dollars on the table by not expanding Medicaid.
If we want to fund priorities like secondary education, higher education, health care, and transportation, Virginia’s tax structure needs reconstructive surgery. If we invest in education, people and infrastructure, jobs will follow.
It is an honor to serve as your state senator. Please contact me at scott@scottsurovell.org if you have any feedback.