Unfunded priorities

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by Bernie Niemeier

Statements about values come up frequently in conversations about leadership.  Ideas like values-based decision making or brand authenticity arising from organizational values are pretty widespread.

In most contexts, values are defined as being based on personality or experience or in philosophical terms.

Yet another way of thinking of values is in economic terms.  After all, the root idea of value is a medium of exchange.

In the economic context, values are best demonstrated, not by what leaders say, but by how their organizations spend their money.  In other words, cost structure is the best evidence of an organization’s true values.  Money is spent on the things deemed most important.

In early December during Associated Press Day at the Capitol, there was a general consensus among four candidates vying to become Virginia’s next governor that there would be no new taxes for transportation passed in the 2009 General Assembly.  Also, that there will continue to be unfunded priorities in state government.

One has to ask, can priorities really remain unfunded?  Using the economic definition, aren’t we just saying that we really don’t value these things?

This recalls the idea of unfunded mandates.  State politicians are quick to point out federal laws that require state-level funding (e.g., No Child Left Behind).  Aren’t we really doing the same thing by claiming popular initiatives to be priorities but failing to find funding from state coffers?

The reality of the current state budget shortfall is well known.  According to a December Senate Finance Committee report, the total could be as much as $3.5 billion, and spending reductions taken thus far only address $1 billion of that total.

Another $2.5 billion of the shortfall must be addressed in the 2009 assembly session, either in the form of increased taxes or further general fund reductions.  As mentioned earlier, tax increases appear unlikely.  The impediments include a lack of political will and a difficult economic environment within which to impose higher taxes.

A full story on the General Assembly’s budget dilemma can be found in this issue’s cover story by Special Projects Editor Jessica Sabbath, starting on page 22.

So what are our priorities?  The state’s 2008-10 general operating fund is about $34.5 billion.  State agencies consume 31 percent of the total.  Debt service consumes 3 percent, and aid to individuals, primarily Medicaid, takes another 15 percent.

The remaining half (actually 51 percent) of the general fund is defined as “aid to localities.”  This includes spending for K-12 public education ($11.7 billion), car-tax relief ($1.9 billion), community service boards (primarily mental health agencies, $1.1 billion), local sheriffs ($1 billion) and “other aid to localities” ($1.9 billion).

Reading these numbers recalls the late Sen. Everett Dirksen’s immortal words, “A billion here, a billion there; sooner or later it adds up to real money!”

So that’s where the money goes.  How has it changed over time?  From 1998 through 2010, the biggest increases have come in three categories:  public education, Medicaid and car-tax relief.

Public education makes sense.  On a national basis, Virginia is slightly below average on state and local spending on K-12 education per capita, and is

behind 19 other states.  Funding increases are vital to the competitiveness of our work force.  This ranking is also somewhat unseemly for a state with many

higher education institutions that are among the finest in the nation.
The increase in Medicaid spending comes as no surprise.  Increasing health- care costs, while unwelcome, are a familiar fact for business and government

alike.  Medicaid reimbursement rates have generally fallen below the market, increasing the chasm between the haves and have-nots in health care.
The number that jumps out is $1.9 billion for car-tax relief.  This is the state’s attempt to keep localities whole following the ill-advised phase-out of

local vehicle taxes in 1999.  The populist pledge of lower taxes as a means of forcing reduced government spending has not worked and is hamstringing efforts

to allocate funds to much needed transportation projects — highways, rail and mass transit.
If actions are more important than words and spending is the true indicator of values, perhaps the commonwealth’s leaders should avoid the mention of

transportation and other unfunded priorities. 

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