I guess it happens every time – the level of hyperbole, assembled outrage, and overall political positioning that accompanies every major budget using public dollars. Much has been made of the price tag for Governor McAuliffe’s legacy budget (the one time Virginia’s governors can actually execute a biennial budget they proposed). Clocking in at over $100 Billion for the first time in Virginia’s history, it’s no small wonder that some parties opposite to the governor used that benchmark as an excuse to dismiss wholesale the particular merits of the budget.
True, this is the largest budget in Virginia’s history – and it is the first time a budget has topped $100 Billion (for two years, mind you – not $100 Billion per year).
But do you know who introduced the first $80 Billion budget? Bob McDonnell.
Do you know who introduced the first $90 Billion budget? Bob McDonnell.
That’s right, the Republican, fiscally-conservative governor increased Virginia’s proposed expenditures from Kaine’s proposed $75 Billion to $85 Billion. Before he left office, he proposed again to raise expenditures from his own $85 Billion proposal to $96 Billion.
But that really only tells half the story. Of course, the total price tag includes both General Funds and Non-General Funds. General Funds are those monies received through direct taxation: individual income taxes, sales and use taxes, and corporate taxes make up 93% of all General Funds. In the FYY2017-18 proposed budget, General Fund expenditures make up about $20 Billion per year, or a total of just over $40 Billion. Non-General Funds are those revenues collected by the state for specific purposes: federal grants and college tuition make up about 55% of Non-General Fund revenues.
True, this is also the first $40 Billion General Fund budget in Virginia’s history, but it’s also up from Gov. McDonnell’s nearly $38 Billion General Fund budget proposed in 2013.
In fact, when considering year-over-year growth, FY2017’s total budget is up 8.13% from FY2016’s proposed budget (proposed in 2013); and FY2018’s total budget is up 3.25% from FY2017’s.
General Fund budgets are up 7.43% between FYY2016-2017, and down 0.46% between FYY2017-2018. (I am only considering differences between proposed budgets, not amended or final (caboose) budgets, as the variance among them is, on the whole, statistically insignificant.)
This is compared to Gov. McDonnell’s proposed budgets, both of which included over 10% budget growth for the total budget when compared to previous fiscal years (10.72% between FYY2012-2013 and 10.08% between FYY2014-2015).
So it’s not that the budget is growing, the question is why is the budget growing. The main reason for the budget growth is the growth in forecasted revenue. By comparison, the FYY2017-2018 budget grows at a rate of 6.49% in forecasted General Funds, while the general fund expenditures grow at a rate of 6.86% (over two years). When Gov. McDonnell submitted his final budget, on the other hand, General Fund forecasted revenues grew by 8.8%, while General Fund expenditures rose by 8.84% (over two years).
So the overall growth makes sense when considering expected revenue. And where does this forecast come from? Well, for General Funds, as described above, it comes from increased revenue from taxation – but not necessarily an increase in tax rates; it’s just that more people could be paying taxes, or they have earned more money and therefore grant more income to the state. Or people could have bought more things in Virginia; or it could be that more businesses in Virginia paid their corporate taxes. At any rate – whether it’s McDonnell’s or McAuliffe’s budget – the argument could be made that an increase in General Fund expenditures and General Fund forecasts are due to increased positive economic activity.
Could the governor propose General Fund expenditures at the same level and reduce the General Fund forecast by lowering taxes (income, sales, corporate)? Absolutely, but due to normal inflation and rising labor costs, this would actually result in a net loss to government services (the merits of which are a different argument), not keep the services the same.
But what about the Non-General Funds? As described above, Non-General Funds are revenues collected mostly through means other than taxation. College tuition at public universities are a huge source of Non-General Funds. Federal grants are the largest source of Non-General Funds, and usually have strings attached. For the purposes of this conversation, federal grants should be considered revenue through taxation, since the federal government does grant those funds they have received through taxation.
But one other interesting point of data is that the amount of General Funds as a percentage of the total budget has decreased from 47% to 37% since 2008. During that same time, the amount of Non-General Funds received through federal grants (again, considering these revenues taxed) has decreased from 41% to 30% during that same time.
One can reasonably infer from this that the proportion of services provided by public institutions has relied less and less on taxpayer dollars over the past decade. Non-General Funds not received through taxation (excluding federal grants) have increased significantly as a percentage of the total budget.
There are certainly items in the budget that will cause contention. Most significantly, the governor’s inclusion of Medicaid Expansion. But by and large, the General Assembly has recognized that the budget isn’t the spending catastrophe that some have imagined it to be. They might disagree on the revenue forecasts and locality burdens, and they will make adjustments accordingly. They definitely disagree on the merits of receiving more Non-General Funds from the Federal Government to expand Medicaid.
Delegate Chris Jones – chairman of the House Appropriations Committee – certainly has his disagreements; but his tempered response to McAuliffe’s total budget package shows that there is also much to agree on, and that it’s the details of the budget – not the total package – that will require serious conversation and debate. “We’ve got a lot of common ground in the budget that we can agree on and we’ll do as we’ve done in the past two sessions,” Jones said, “we’ll sit down and work through those issues.”
