Virginia Budget Faux Surplus

From The Washington Examiner  7/19/10:

Virginia’s government is in surplus, and the McDonnell administration couldn’t be happier. So, too, are state workers, who were promised a three percent bonus if the state finished its fiscal year in the black.

But is Virginia’s surplus really all it’s cracked up to be? Republican Delegate Bob Marshall put it this way:

To say Virginia ended the fiscal year with a surplus when we decided not to pay all the bills i.e. VRS (I did not vote for the final version of the budget because taxes and fees were added which did not pass both chambers or which were rejected), is to be caught speeding with literary license.

Needless to say, Marshall’s pith doesn’t fit the narrative being peddled by McDonnell and others, who very much want the world (and credulous talk show hosts) to believe the books were balanced and a surplus generated without gimmicks or tax hikes.

Here’s McDonnell pitching his story to Sean Hannity. No taxes raised? A model for Washington politicians to follow? Sorry, Sean. They already do.

Marshall’s point about the VRS – Virginia’s state employee retirement system – is an important one. To help make the budget numbers work, the General Assembly declined to make a $620 million payment into the VRS. They say they will, at some future date, and with interest. But that’s playing with fire.  A review of state pension plans from the American Enterprise Institute put Virginia’s unfunded liabilities at nearly $53 billion – 17 percent of state GDP.

So what about the taxes? To believe the line that taxes weren’t raised requires us to ignore the requirement that retailers had to remit their July sales tax collections in June — long before the money was actually collected (but very convenient for the state, considering its fiscal year ended on June 30). We must also pretend not to notice the reduction in the dealer discount – the monies from sales taxes retailers keep to offset their cost of collecting the tax – in addition to a special hold-back for the sale of certain tobacco products.

Virginia’s manufacturers took a tax hit, too, as the General Assembly, and the McDonnell administration, agreed to let them claim only 2/3 of a federal tax credit on their Virginia returns. This was actually a victory, of sorts, as the Assembly originally proposed to cut the credit even more.

Back in March, Lt. Gov. Bill Bolling urged the General Assembly to eliminate these de facto tax increases, but also put in a good word for fee hikes…which were raised by $95 million. 

And a fun fact about those fee increases? According to the House and Senate finance committees’ revenue report, any monies generated above and beyond their intended purpose revert to the state’s General Fund.

Believing that no taxes were raised also requires that we overlook the two percent hike in alcohol prices at state-run ABC stores . And let’s not forget: by raising liquor prices (or “mark-ups”) the state will, by extension, also realize more tax revenue from liquor sales.

If you ignore all those things, then yes, Virginia is in surplus and managed to get there without a tax hike and without a single gimmick.

But doing so requires more than willful ignorance. It demands a highly developed sense of the absurd.

The Va budget started out on a false premise and apparently is ending up on one also. When the budget was approved it included a huge loan from VRS to be paid back with interest. That loan should have never happened. I am not even sure it is legal according to the VA Constitution. It goes down hill from there. Yes, taxes were raised. No, VRS is not getting the money put it that is should get put in. Any funny business with the state pension is because of the State of Virginia and the funny money being played the past year. I smell a big class action lawsuit on the horizon.

Virginia needs to follow its own Constitution and balance the budget for real, not just on paper. It needs to pay its bills on time and it needs to not borrow money from within to balance its budget. The VRS is not the state’s AMT.

Is Bob Marshall the lone voice in the wind willing to speak the truth about Virginia funny money?