Discipline must shape budget
Virginia should prepare for the worst, hope for the best as it plans future spending
For long, toward the end of the year, the General Assembly’s “money” committees have invited outside experts and staff to present insightful, factual analysis of the state’s fiscal condition and its immediate budgetary challenges.
These highly valuable “retreats” were completed recently in COVID-19 conditions and were therefore offered, not in a hotel conference center, but online.
No matter, the material remains solid and instructive. You could skip the business suit, but had to provide your own coffee.
Moody’s Analytics — a long-standing, well-regarded financial outfit — laid out what it means to be “Budgeting for a Pandemic Economy” and, sure enough, the presentation slides show the state’s economy motoring along through last year, only to reach the early months of 2020 and plummeting into a COVID-induced crevasse.
Down the economy went — taking state revenues with it — and did not reach bottom until May.
Slowly things came back, but September arrived and it all stalled again. The pandemic was not through with us.
Little wonder, then, that Moody’s Director of Public Sector Research Dan White produced a slide saying that budget choices going forward will be, “As simple as nailing Jell-O to a wall.”
The hard, un-Jell-O message: Be disciplined. Proceed cautiously.
Moody’s also offered some gentle, but unequivocal advice: Use more than one nail to keep things in place, i.e., have more than one alternative scenario as part of your planning process. Help everyone to know the risks.
Also, understand the key assumptions driving each scenario and how they affect budget outcomes. Be sure to consider all factors, meaning budget shortfalls, revenues and spending.
In sum, plan for the worst and hope for the best.
With hope comes prayer. You pray that the message takes, that state lawmakers paid close attention and will heed the warnings. Whatever they may be looking at, in the way of revenue forecasts, should be measured against sure certain uncertainties.
State spending demands, some manda
tory, will have to be addressed. Agency requests total nearly $3 billion for the 202022 two-year budget — and that does not include across-the-board salary increases for state employees or statewide requests related to the minimum wage increase.
Nor does it address ever-demanding Medicaid forecasts. Total Medicaid spending is projected to increase by more than $600 million in the biennial state budget.
One obvious funding priority will include roughly $120 million for the state to carry out mass vaccinations, once they become available next year.
But the room for new initiatives — for many of the brave allocations planned before the pandemic hit, but left unfunded — may remain narrow or not exist at all.
“Economic uncertainty related to a possible ‘second wave’ of the virus and access to a vaccine represent significant risks to revenue growth,” noted April Kees, director of the Senate Finance & Appropriations Committee Staff, in her presentation. “It is also unknown whether there will be additional federal stimulus packages.”
That echoes, nearly to the letter, the counsel of Moody’s.
There is good news, however. Job losses have not been as severe in Virginia as in other states, particularly in the fields of information, construction and transportation.
The big hit? Hospitality. Lodging. Restaurants. Those places we love so much but have not frequented much lately. The pain there has been substantial.
Virginia will clear the year in reasonably good fiscal order. The old impulses (restraint) held true, mostly, even with the legislative impulse to spend and spend some more, so readily evident before the pandemic hit.
Gov. Ralph Northam’s fiscal team deserve praise for diligently “working the problem” and doing so effectively.
Interestingly, another little piece of analysis, reported by NBC News, shows the relative levels of anxiety and depression around the country. Turns out that Virginians exhibit lower levels of stress than citizens of any other east coast state.
And we’re pretty close to the bottom nationally. Prudent public budgeting choices may help keep it that way.