Lt. Gov. Bill Bolling recently penned this commentary on the budget challenges facing Virginia:
The biggest challenge facing the General Assembly during this year’s legislative session is the adoption of a new state budget for the 2010-2012 biennium.
In December, outgoing Governor Tim Kaine introduced a budget that sought to close a projected $4B shortfall through a combination of $2B in budget cuts and $2B in tax increases. However, it is apparent that Governor Kaine’s tax increase proposals will not survive legislative scrutiny.
During his first speech to the General Assembly, Governor Bob McDonnell made clear that he will not support a budget that includes higher taxes. We simply do not believe that it is appropriate to raise taxes on families and businesses in the midst of the worst recession in 60 years.
Likewise, the General Assembly does not appear to be prepared to support high taxes. In the House of Delegates, Governor Kaine’s tax increase proposals have already been rejected by a vote of 97-0; and even in the State Senate, where Democrats hold a 22-18 advantage; it does not appear as though they can produce enough votes to support higher taxes.
Given the lack of support for higher taxes, it is apparent that the only way to balance the budget is through additional spending reductions. While reducing government spending is not easy, it is sometimes necessary.
Many of the Commonwealth’s current financial troubles are the result of bad decisions we have made in the past. To put it simply, we have been spending money we didn’t have to make promises we couldn’t keep.
We sought to pay for these promises through overly optimistic revenue projections, raids on the rainy day fund, spiraling amounts of state debt and federal bailout dollars. While these types of budget gimmicks can work for a while, sooner or later the underlying structural imbalances in the budget must be corrected.
In addition, because of the national recession state tax collections have declined significantly. Tax collections declined by 9.2% last year, and tax collections are projected to decline by an additional 3-4% this year.
During tough economic times, families and businesses have to prioritize their spending decisions and make certain they are not spending more money that they are taking in. Government must do the same.
Unfortunately, some seem to think that government should be immune from these fiscal realities, but it is not. When revenues decline, so must spending. It really is that simple.
While reducing state spending by an additional $2B will not be easy, it is important for us to keep these spending reductions in perspective.
Based on current projections, during the upcoming biennium state revenues (General Fund) will be $14.5B in 2010-2011 and $15.2B in 2001-2012. The last time state revenues were at this level was in 2006, when total state spending was $14.7B. So, in order to balance the budget through spending reductions we will have to return spending to where it was in 2006.
In order to achieve this goal, spending in the first year of the upcoming biennium will have to be reduced by an additional .7%, and spending in the second year of the budget will have to be reduced by an additional 5.8%.
While I don’t want to minimize the significance of these spending reductions, these are clearly achievable goals and the reductions must be made. There is no other alternative.
The Senate and House of Delegates are scheduled to release their respective budget recommendations in the next two weeks. We look forward to seeing their recommendations and working with them to reach an agreement that can receive broad bipartisan support.
