Virginia's GOP Created Fiscal Cliff

An article in the Richmond Times-Dispatch looks at the Commonwealth of Virginia's own approaching fiscal cliff.  It's interesting that many of the problems cited that will make Virginia less competitive in the future and more fiscally insolvent track directly to the policies of the Republican Party of Virginia and its refusal to raise taxes to fund desperately needed spending on transportation, infrastructure and education.  While not specifically mentioned in the article I would also cite the Virginia GOP's continued push for reactionary social policies that make the state unattractive to progressive businesses that are hesitant to try to relocate employees with almost Medieval laws on equality and women's rights.  Should Ken "Kookinelli" Cuccinelli be elected governor next November, the state's decline would likely accelerate. Here are some article highlights:

A national task force says Virginia may be heading toward its own version of a “fiscal cliff,” despite the state’s well-deserved reputation for prudent financial management.

Virginia could be heading for a major fall because of its reliance on federal government spending and its failure to fashion a sustained source of revenue for transportation improvements essential to economic growth.

“The problems that threaten other states the Task Force studied also threaten Virginia; but, most of the problems are less worrisome thanks to the state’s sound financial management and good fortune,” the report states. “The two exceptions are potential cuts in federal spending and chronically unmet transportation needs.”

The study released this month also raises concerns about the decline in state spending for public education, the gradual privatizing of higher education by substituting higher tuition and fees for state support, and declining state investment in infrastructure because of limited debt capacity.

Options for raising revenues to pay for public services are dwindling, especially for Virginia’s 170 counties, cities and towns, it says, while costs are rising, especially in the state’s bare-bones Medicaid program for the poor and the public employee pension obligations that the state has systematically underfunded.

“The state’s planning documents indicate that Virginia’s general fund revenues will not be adequate to fund obligations from prior years (debt service and pensions), keep up with health care costs, restore recession slashes to local aid, improve health and education services, and maintain and improve transportation and other infrastructure,” the report concludes.

[O]ne of the advisers on the Virginia report said the state is living off past accomplishments that can’t be sustained without changes in approach.  “The problem now is we need some investments,” said James J. Regimbal Jr., a former Senate Finance Committee budget analyst who advises local governments on fiscal policy and recently authored a biting critique of the McDonnell administration’s approach to funding transportation through tolls and private partnerships.

Local government advocates focused on the report’s warning of a reckoning ahead in the next four to six years as Virginia runs out of money for transportation improvements and other investments.  “We’re coming to a time in which the ‘Virginia way,’ which means relying on economic growth to generate the revenue that pay for public services, is no longer going to be able to pay the tab,” said Neal Menkes, director of fiscal policy at the Virginia Municipal League.

Virginia is more dependent on federal spending than any state in the country, said the task force, which noted that Moody’s Investors Service already has placed the state on a credit watch because of the potential for federal spending cuts that could cost the state 122,800 jobs, $7.3 billion in wages and $10.5 billion in annual state gross product.

Transportation is the other elephant in the room for state policymakers, the report states. “Inadequate funding has proved chronic and resulted in the substitution of capital funds for operations and maintenance and a growing dependence on federal funds.”  The task force notes gridlock on transportation funding since Virginia last increased the gasoline tax 25 years ago, as well as changes in vehicle efficiency and driving habits that have eroded the value of the tax by 45 percent.

Virginia’s Medicaid program ranks 48th in the country in eligibility and benefits even though the state ranks seventh in per capita income, the report notes. Expansion would bring an estimated $21 billion in federal spending the first seven years and generate more than 30,000 jobs in health care by some estimates, as well as provide health coverage to more than 400,000 Virginians without it.  But expansion also would cost Virginia more than $1 billion over 10 years, according to the McDonnell administration’s most recent estimate, at a time when Medicaid costs outpace revenue growth to pay them.

In the end, the task force suggests that Virginia faces a politically difficult decision about taxes and investments.  “Will the state’s leaders determine which crucial public investments must be made?” it asks. “Will they make the case to taxpayers for the need to raise revenues and use the golden AAA credit to leverage those revenues for tomorrow’s infrastructure?”

As long as the GOP controls the General Assembly and the governorship, the answer to the study's last question is a resounding "no."   Virginia will continue to decline thanks to the Virginia GOP's backward and greed driven policies.