Business-like approach to budget raises important questions

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Print this page by Bernie Niemeier

The biggest first-year challenge facing Virginia’s new governor will be dealing with the state budget.

As he confronts that challenge, Gov. Bob McDonnell appears to be sticking to his campaign promises: no new taxes and no elimination of existing tax exemptions.

He says he wants to run the state like a business, an attitude successfully employed by former Govs. L. Douglas Wilder and Mark R. Warner.  They, too, were faced with budget woes during difficult economic times, yet emerged from the governor’s mansion at the end of their terms with reputations intact. (It’s too early, by the way, to tell how history will treat McDonnell’s immediate predecessor, Timothy M. Kaine.)

The problem for McDonnell is that current budget shortfalls are far deeper than in the past.  Education, transportation, public safety and other areas have already taken deep budget cuts.

Complicating matters is the fact the budget holes can’t be plugged, as they were last year, with short-term infusions of federal stimulus money.  Assuming no other changes, federal dollars will need to be replaced with money from state coffers in upcoming budget cycles.

Running government like a business can be simply explained by the reliance on the two levers that control an income statement – revenue and expense.

McDonnell essentially has ruled out new revenues (except for money he proposes to collect from new road tolls and the sale of state ABC stores).

Left largely with expense-side solutions, the governor can resolve the budget gaps only by dramatically downsizing state government.  Therein lies the conundrum for the McDonnell administration:

• Is there really enough inefficiency in state operations to offset dramatically reduced budgets for essential services?
• Will adding a large number of state workers to the ranks of the unemployed place an even greater demand on government services?
• Even if realistic, can these actions be taken quickly enough?  (Virginia’s governor, after all, only has four years to get anything done.)

If McDonnell intends to face this situation like a businessman, he should heed the collective advice of many of the state’s business leaders in identifying essential government services. 

In mid-December a statewide panel assembled by the Virginia Chamber of Commerce sent a letter to McDonnell outlining seven “fundamental priorities” of the business community.  These were transportation, economic development marketing, work-force development, the regulatory environment, health care, workplace stability and energy.

The issues raised in the letter have been explored in depth in the pages of Virginia Business. We recognize that meaningful progress in most of these areas will require significant new expenditures by the commonwealth.

Without investment in these areas, Virginia’s much-acclaimed status as the “Best State for Business” will be jeopardized.

While we wait to see how McDonnell’s business plan solves the budget crisis, we applaud some ideas he has advanced for changing the awkward budget process.

His proposal is to change the state budget cycle from even-numbered to odd-numbered years is a good idea. It would place more budget responsibility with sitting governors and legislators than with outgoing officeholders.

Even better is a proposal from McDonnell’s camp to amend the state constitution to permit the governor to run for re-election.  Virginia is the only state in the union that does not allow its governor to serve two successive terms.

This is not a move that would benefit McDonnell directly. The constitutional amendment would have to be passed by two successive general assemblies with an election held between. Then the amendment would have to be approved by voters in a general election.

Despite the lengthy process, the change is a worthy goal. Under the one-term limit, Virginia’s governors are lame ducks from the moment they are sworn in.  Political inertia and petty turf guarding in the legislature and state bureaucracy perpetuate this antiquated system.

In reality, however, McDonnell will have plenty on his plate finding ways to make ends meet with the state budget. Gubernatorial succession probably will likely remain a low priority. 

Editor’s note:  Virginia Business Publisher Bernie Niemeier is a member of the board of directors of the Virginia Chamber of Commerce.

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