Revisiting Virginia’s Non-General Funds

If there has been one consistent position in the maddening shifts within the Republican Party of Virginia on taxes and spending, it has been a determination to reduce General Fund spending and control. Bill Howell’s attempt to counter Susan Stimpson’s criticism of his tax-hike record was centered on a reduction in GF spending during his tenure as Speaker. Governor McDonnell’s determination to “get transportation out of the general fund” led him to propose a major tax increase, open a door to Medicaid expansion, and alienate him so deeply from activists in his own party that many were prepared to swallow a Washington-driven “honest services fraud” prosecution against him.

One can understand McDonnell’s point of view, given the behavior of Democrats on transportation funding going back to Mark Warner – i.e., starve road funding for every other center-left priority, and then demand higher taxes to backfill the gap. However, Non-General-Fund spending has risen from 48% of state appropriations for the 2000-02 budget to over 61% in the current one (2014-16). That’s over $12.5 billion that has shifted into automatic funding (i.e., dedicated and automatic revenue streams)…and away from direct legislative control.

I would humbly submit that this is a trend we should reverse, for the following reasons.

Nongeneral spending is harder to reduce. We see an allegorical example with federal entitlements, which have similar automatic funding mechanisms. The last time Republicans seriously attempted to reform entitlements, it nearly resulted in a debt default (2011); the previous attempt led to a government shutdown that still traumatizes the party today (1995). In fact, less than a decade after the shutdown, a Republican president and a Republican-controlled Congress actually expanded entitlements (Medicare Part D). In the Commonwealth, whole swaths of funding lines are now considered off-limits in any budget discussions. Why? Because cutting spending there requires changes in the law that led to funding in the first place. Meawnhile, the spending goes on, with little oversight.

That leads to the second problem: nongeneral spending gets less oversight. Since the funding streams are a matter of law – and don’t need legislative revisiting every two years – they get less attention then general fund expenditures. Inefficiencies are either missed or shrugged off as “already paid for.” The Democrats are using a varient of this argument in their attempt to sell Medicaid expansion by insisting the federal government will pay for it; even the Republican argument against it (that the funding is not 100% starting in 2017 and is hardly guaranteed) assumes that if the funding was a certainty that everything would be ok. Whether or not Medicaid is a decent investment for the taxpayer (let alone the would-be clients) is a far-less important topic for discussion in Richmond. But while there may be two types of funds (and many actual funds on the nongeneral side) there is only one set of taxpayers. Inefficiencies are inefficiencies, and too many are being given short shrift because they’re not in the general fund. To this day, few Virginians are even aware of how Warner’s changes to Medicaid in his term as Governor sent spending skyrocketing during the aughts.

Warner never even had to answer for his decision, which leads to the third problem with Non-General funding: it reduces accountability for our elected officials. Even when things are going well financially, nongeneral funding is essentially automating the budget. When things aren’t going well, legislators and Governors can suffer the ultimate embarrassment: appearing to be “in office but not in power.” If 60 cents of every dollar paid by Virginia taxpayers is spent with no outside oversight, to whom can Virginians turn to fix budget messes? The General Assembly (and Governors) have essentially outsourced spending decisions for a majority of government – leaving a large portion of said government effectively ungoverned.

Non-general funding is hardly an evil force in Virginia; even I will acknowledge it can be useful. I do believe, however, that that time has come to put more of Virginia’s spending control where it belongs – in the most recently elected legislature.

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