IMAGINE A BUSINESS that declares a profit two years running but achieves it by withholding payments owed to an important supplier. In effect, that’s what Virginia Gov. Robert F. McDonnell has now done by declaring what he unconvincingly terms a budget “surplus” for the last two years. Call it what you like, governor, but it doesn’t change the rather more awkward facts.
Like most states, Virginia has made massive spending cuts since the recession started three years ago, slashing billions of dollars in outlays to schools, colleges and universities, and virtually every social service the state provides. Although Republicans like Mr. McDonnell don’t often mention it, the impact of those cuts was cushioned by the federal stimulus, which added hundreds of millions of dollars to cover health care for the poor through Medicaid, among other needs.
Last year, with the stimulus dollars running dry and targets for further savings dwindling amid already shrunken government spending, Mr. McDonnell relied more heavily on budgetary gimmickry than he has before. He postponed $620 million in payments owed to the state pension system, which covers 600,000 teachers, among other beneficiaries. And he declared the money would be repaid starting in 2013 — conveniently, the year his gubernatorial term ends.
Now Mr. McDonnell has announced that Virginia notched up a “surplus” of $311 million for the fiscal year that ended June 30. But just like last year — when to manage a balanced budget he also postponed payments of $135 million to the state pension fund, known as the Virginia Retirement System — it is a surplus with a very large asterisk. In fact, the $620 million that Mr. McDonnell withheld from the pension fund is almost exactly twice the size of the “surplus.”
What Mr. McDonnell calls a surplus is the result of higher-than-forecast individual and corporate tax receipts, a product of the past year’s economic uptick. The money will go to a fund earmarked for cleaning up the Chesapeake Bay and for education. But even with that slight improvement, tax collections are still way below their pre-recession levels in Virginia, as elsewhere.
We don’t think Mr. McDonnell has been a bad steward of the state’s finances. Many states are in worse shape than Virginia, and nearly all have resorted to some sort of budgetary legerdemain, often involving postponing payments, to balance the books. In a time of severe fiscal stress at every level of government, the gimmicks to which Richmond has resorted are no worse than what has become the new normal around the country.
Still, Mr. McDonnell would be wiser to level with Virginians about the price and sacrifices such maneuvers will entail when the state repays its pension fund and faces up to other deferred obligations, including the billions of dollars in new borrowing to fund road improvements. Having refused to raise across-the-board taxes, and with few cuts left to make, the governor has been forced to postpone a day of reckoning. In effect, he is passing off the pain to his successors.
Loading...
Comments