A rainy day during a budget drought

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by Bernie Niemeier

The forecast for the state budget shortfall has become profoundly worse, now totaling up to $1 billion, according to some estimates.

Home sales are down, and housing values have dropped precipitously, resulting in lower sales tax collections and lower real estate tax assessments.

Following Gov. Timothy M. Kaine’s announcement of new budget problems in August, the editorial page of the Richmond Times-Dispatch suggested “non-essential” agencies, such as the Virginia Tourism Corp. (VTC) and the Virginia Economic Development Partnership (VEDP) should be targets for spending cuts.  At Virginia Business, we disagree.

Both agencies are essential to the revenue side of the state budget. The VTC promotes tourism, a vital industry in Virginia. Visitor spending supports local merchants and increases sales tax revenue.

VTC’s budget was cut heavily several years ago during another budget balancing act, and it has never recovered.

VEDP, on the other hand, promotes industrial development and job growth, resulting in higher tax revenue at the state and local level. VEDP has been responsible for landing many major businesses deals in Virginia.  Some of the most notable have involved companies such as Philip Morris USA, Volkswagen of America and Rolls-Royce.

It is too easy to conclude, as the Times-Dispatch did, that these agencies perform nice-to-have, rather than essential, state functions such as education, transportation and health care.

To reach such a conclusion is like a business owner saying that keeping production lines running is more important than sales and marketing.  You just can’t make one work without the other.  Does any business really think that it can keep the doors open for long without its sales force?

At the recent Democratic National Convention, Virginia was cited as an example of the progress that can be achieved by transcending party lines to find solutions.  But how much longer will Virginia be considered the nation’s “Best Managed State” or the “Best State for Business” if we continue to insist on short-term solutions and fail to address the commonwealth’s long-term interests?

State Secretary of Finance Richard D. Brown will report a revised revenue forecast in October.? When the legislature reconvenes this January, partisan gridlock at the Capitol must end.? In addition to balancing the budget, the legislature needs to find funding for transportation.? We also need to invest in energy and the environment.

Despite a lingering drought throughout the state, we agree with the Times-Dispatch that the time is right for the General Assembly to tap its “rainy-day fund” to close some budget gaps.

The rainy day fund was created for just this purpose, but it will not be enough.  The General Assembly needs to rise above party politics and focus on long-term solutions that are good for all Virginians.


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