Armed with painful memories of the last recession, Virginia budget planners and elected officials are approaching the possibility of a downturn in 1979 confident that their cautious revenue projections will be realized.
The severe recession of 1974-75 caught Virginia early in a two-year budget based on overly optimistic revenue hopes. To compensate for the tax losses that flowed from industrial cutbacks and unemployment, Gov. Mills E Godwin imposed a series of wpending reductions that exceeded 5 percent of the state budget.
There were outcries from affected services, especially schools, but the state managed to stagger through the recession without a major tax increase.
Maryland, on the other hand, resorted to a penny increase in its sales tax, from 4 to 5 cents, an increase that produced a mildly embarrassing surplus when the economy recovered.
The anti-tax spirit in Virginia that resisted new revenue proposals to rescue the budget during the recession is equally strong today, Godwin's successor, Gov. John N. Dalton, did not take an ironclad oath against tax increases during his campaign, but he repeatedly said he felt they would be unnecessary during during his term.
So far, it appears that Godwin's last budget, which will cover the first two years of the Dalton administration, is in good condition to withstand a downturn.
Revenue forecasting in Virginia is complicated by the fact that the state operates under a two-year budget, requiring longer-range forecasts of economic troubles.
The current budget was drafted in late 1977 on the assumption that fiscal year 1978 would be one of average growth and that a slowdown or recession would occur in fiscal 1979.
As it turned out, real growth in the gross national product of 4 1/2 percent in fiscal '78 exceeded the budget planners' forecast of 3 1/2 percent, giving state revenues a running start toward the goals of the 1978-80 biennium.
Virginia finaished the last biennium June 30 with a $37 million surplus, about 1 percent of state-imposed taxes collected during the two years. That $37 million is available for a cushion against unexpected shortfalls in tax revenues during the 1978-80 period, but the pressure to spend it already is mounting.
In addition to the usual competition for supplemental funds from state agencies, there are proposals to send part or all of the surplus to city and county governments to relieve local property tax burdens. This issue will be fought in the Feneral Assembly session this month and next.
The architects of the current budget counted on real growth of only 1.6 percent in this fircal year and were prepared for the economy to be in the midst of a slowdown by now.
Things have turned out much better than expected, and by year's end Secretary of Administration and Flnance Charles Walker was saying that fiscal year economic growth could exceed the state's budgetary assemption by a full percentage point.
During the first quarter of the '78-'80 biennium, state tax revenues exceeded projectionslby a healthy $12.5 million, desptie a disapponting year-to-year increase in sales tax collections of only 2.6 percent.
A major factor in the good revenue start was high interest rates that enabled the state to earn $6.8 million more than expected on investment of its own funds, chiefly in certificates of deposit.
With the surplus from the last biennium and higher than expected revenues so far in this one, the state heads toward the possible downturn with a $50 million cushion. Some economists, including Leland E. Traywick, director of the Bureau of Business Research at the College of William and Mary, have encouraged the government to keep this cushion intact.
Nevertheless, Traywick commented in his yearend edition of the Virginia Business Reports that the state and the entire Southeast should face better than the rest of the nation if recession strikes.
He cited the relatively low dependence on recession-sensitive durable goods manufacturing in the state and region and persistently low unemployment rates in Virginia. Unemployment in Virginia reached only 6.9 percent of the work force during the last recession, compared with a 9 percent peak nationally. At the end of November, the state's rate was 4.7 percent, compared with 5.8 percent in the nation.
Despite relatively low jobless rates, another painful feature of the last recession in Virginia was a logjam of unemployment benefit applications at the Virginia Employment Commission.
Since then, the agency has made the transition from manual to computerized record keeping, a move that officials say should prevent a recurrence of the 1974-75 delays.
Outside of the general performance of the economy, the greatest fear for 1979 among officials in Virginia, heretofore a weak union state, is labor peace. The economy survived strikes in the coal fields and against the Norfolk and Western Railroad last year, but this year the worry is over the state's largest private employer, the Newport News Shipbuilding and Drydock Co.
A conflict between two competing unions is being thrashed out there. "One shudders to think of the economic harm of a strike, with over 22,000 employes at the shipyard and a payroll something in excess of $1 million per working day," Traywick said in his preview of 1979.