Optimism as state budget takes shape
Virginia has weathered COVID-19 with less economic fallout than many other parts of the country
Good news about the state budget emerged on Wednesday. “Revenues are exceeding official forecasts,” Gov. Ralph Northam announced. “Even during a pandemic.” It seems counter-intuitive, but Virginia has, on balance, weathered COVID-19 with less economic fallout than many other parts of the country.
“Other states have laid off workers, cut services, and even borrowed money to pay the bills — actions that will weaken their financial pictures for years to come,” the governor said.
“But in Virginia, our finances are solid, and the actions we have taken have kept our triple-A bond rating secure,” Northam told Virginia lawmakers serving on the Senate Finance and House Appropriations committees.
“We are one of only 13 states that hold this rating, and it’s because we laid out a long-term financial plan, and we have stuck to it, in good times and bad. We must continue this work.”
That would make sense and constitutes responsible, prudent, level-headed thinking.
Still, last January’s glean in many youthful, inexperienced legislative eyes — you know, when pupils twinkle and turn to dollar signs — may have just lit up again.
Not that it takes much. Even as conditions turned grim earlier this year, there have been lawmakers eager to dive into state budget reserve funds, arguing that “if this isn’t an emergency, what is?”
But the governor’s presentation on Wednesday suggests if Virginia keeps its collective financial head, if it thinks and acts long-term, rather than short, it could emerge from the COVID mess in enviable fiscal shape. Virginia would be ready to grow, ready to prosper.
Accordingly, Northam wants to sock away roughly half the $1.5 billion of the additional revenue available.
He wants to shore up pension funds and the state’s reserve.
This addresses that category of concern often referred to as “unfunded liabilities.” That’s when you make a public commitment to spend public money and assume that the money will be available when the time comes.
Wishful thinking, in other words.
Northam wants none of that. Hard cash works better. He says, “this level of reserve funding will get us to the goal of having 8% in reserves by the end of my term. This is more than any previous governor of either party.”
Be clear, there is justification behind many of the assembly’s spending inclinations. In education and health care, housing and criminal justice, there is work to be done. It will cost money.
The debate will be over how to make progress without losing discipline.
The same goes with the nascent maneuvers to raise taxes in the upcoming legislative session. That includes: a hike in corporate taxes; an expansion into services for the sales tax; and a return of the estate tax.
All are being actively discussed and the correct response: Not now.
Cut the liabilities first. “The lower we can push down these liabilities, the better it is for everybody,” Secretary of Finance Aubrey Layne says.
Lay a foundation for growth and investment. Put some fiscal bedrock under whatever lawmakers may long to do.
It sounds old-fashioned. It sounds boring. It’s like going to Las Vegas, riding the bus and never visiting the slots. Snooze city.
But that is the formula for the moment, faced with current circumstances. Gov. Northam gets it right.
Virginia’s ancient General Assembly has suffered an uneven year. The meandering “special session” did not exactly scream “stability.”
Yet, some sound legislative leadership has emerged in the form of Senate Finance Committee Chair Janet Howell and House Appropriations Committee Chair Luke Torian. Together with Layne, they’ve worked out differences and made an effective team.
True, both Howell and Torian represent Northern Virginia jurisdictions. It’s a bit weighted in that direction these days. But there are indications that both lawmakers understand that Virginia’s long-standing fiscal habit of restraint can work for all ideologies, all regions, even those yearning to spend.
“Good things happen when you get your balance sheet in order,” Layne told a reporter.
That’s the path forward.