"You can applaud now. You might not when I'm finished."
Those were the opening words of Governor Kaine when he addressed the General Assembly today with his plan to balance Virginia's budget during our worst recession since World War II.
Under our State Constitution, the Virginia legislature can only operate using current funds. Borrowing is strictly limited to capital projects. Therefore, during a recession, the legislature must still balance the budget to obey the Constitution.
I was present at the Governor's speech today and also participated yesterday in a conference call with him. Here are the highlights of his plan which is now public:
Revenue Projections: The Governor is currently projecting nearly a $3 billion deficit which is approx. 10% of our General Fund budget through 2010. That is what we have to find. Some of that can be done by drawing down our "rainy day" fund or shifting projects to bond financing. However, even those options leave a $2 billion hole. Under the Governor's plan, about 75% of that is made up with cuts as follows ...
K-12 Education: Historically, primary education has been saved from state budget cuts. No longer. The Governor's plan saves about $400M in costs by capping the state's funding for K-12 support personnel, i.e. school employees that work outside the classroom. While localities can still fund these positions, the state will focus primarily on instructional personnel and reduce all other support. This is a major change which deserves a much longer discussion, but that's the basic gist for now.
Higher Education: The Governor previously told colleges and universities to prepare for 15% cuts. That is adopted into the plan. The only exception will be for community colleges, only reduced by 10%. The Governor is proposing an increase in need-based scholarships to cushion the expected tuition hikes, which will be significant. Again, this deserves more discussion but that's the basic idea for now.
Health Care: Virginia currently ranks 48th nationally in our Medicaid funding per capita. Despite that lowly status, we are still increasing costs in the face of a higher caseload. The Governor's plan saves $418M by cutting Medicaid reimbursement rates for hospitals and doctors and limiting eligibility for new applicants. There is some discussion in the halls of the State Capitol that President-Elect Obama's future stimulus package will cover this gap with increased Federal support. Otherwise, this is going to be a very, very tough hit on our vulnerable citizens.
Public Safety: I believe we have too many prisons in Virginia, which hurts us financially. The Governor agrees and has halted expansion of new facilities. In his budget plan, he goes further by allowing the Department of Corrections the discretion to release non-violent state offenders for the last 90 days of a long-term sentence (current law is 30 days). With our large incarcerated population, that one small change will save well over $10M. From my conversations, this particular initiative is supported by the Sheriffs Association.
Those are some highlighted cuts. There are many others, including elimination of the 2009 state employee salary increase and over 1,000 layoffs at state agencies. Those details are still being developed. Meanwhile, here are some proposed revenue increases from the Governor:
Cigarettes: The Governor's plan proposes a new 30-cent per pack cigarette tax (for 60 cent total which is still below the national average). This will raise $148M to counter-balance some (not all) of the Medicaid cuts. It will also bring Virginia closer to matching our Medicaid cost from smoking-related illnesses with revenues from sale of tobacco. I support this.
Conservation Tax Credit: The Governor will halve the amount available per year as an income tax credit under this program. That will save the state $50M and should not stop preservation efforts. I support this policy change also.
"Dealer Discount": Historically Virginia's retailers have retained a small portion for remitting state sales tax. The Governor's budget ends this practice thus saving the state $64M in retained funds. Sounds logical, but as the representative of several thousand retail merchants I need to hear a lot more. I'm sure I will.
All in all, the Governor's plan is comprehensive and well-thought out. I don't agree with all the steps. I think it may underestimate the shortfall. I also believe it is not aggressive enough in addressing preferential tax breaks given to the well-connected over the past few years.
However, it is not random. These are real cutbacks which reflects articulated priorities.
JCP Notes: Do you have a business? Are you focused on surviving in this economy? Do you have an idea for our state to grow economically? Please join me on
Friday, January 9th, 2009 at 7:30 a.m. at the Courtyard by Marriott in Tysons for my first annual "Business Leaders Breakfast." Details are at
www.fairfaxsenator.com. Our Business Roundtable will feature Mr. Aneesh Chopra, who is the Virginia Secretary of Technology and a dynamic leader in the field of technology-based job creation. All are welcome but we are limited to 100 seats so contact Jenn Robinson at 703-349-3680 or
jenn@fairfaxsenator.com to reserve a seat today. The cost to attend is $50 and includes a full breakfast as well as a presentation and Q&A session. Also, if you are interested in being a sponsor of the event, please let Jenn know.
The end of 2008 marks the end of my first year representing you in the State Senate. It's been an honor. Thanks to all of you who have taken the time to review my newsletters and provide your feedback (positive or negative!) My office will still be in Fairfax through the first week of January. If you need us, please contact me or Kathy Neilson at 703-349-3361 or
www.fairfaxsenator.com. Let us know how we can represent you better.
Finally, we have many great faith traditions in the 34th Senate district. In light of our family's, Sharon and I wish you a "Merry Christmas!!" and a happy new year in 2009.
Sincerely,
Chap Petersen
Visit us at
www.fairfaxsenator.com.
