Stimulus plan, falling revenue complicate efforts to cut costs

Last week, the House of Delegates voted on its version of amendments to the 2008-2010 budget. The House budget adopted many of Gov. Tim Kaine's strategies and priorities for the commonwealth in this difficult recessionary time. In particular, the House budget seeks to protect teachers in the classroom, services to our most vulnerable citizens, and the environment.

However, while the governor sought long-term savings that will position us better for the future, the House budget relies on a number of one-time, short-term funding sources to make new commitments in these areas that cannot be sustained. For example, the House takes $149 million in cash from the Water Quality Improvement Fund to pay for regular ongoing expenses. The House also adopts a $43 million tax amnesty program to provide one-time payments from tax violators.

The House budget does provide increased flexibility to local school boards to address declining revenue. Gov. Kaine protected K-12 funding in each of the three earlier budget reductions that he has had to make. For next fiscal year, because of the size of funding declines, the governor has proposed to establish for the first time staffing standards for support positions in our local school systems. The proposed staffing standard is one support position for every four teachers. This resulted in a statewide funding decrease to our local schools.

The House gives local schools flexibility in how they use their available funding by waiving local match requirements and allowing for a voluntary early retirement program for teachers. While no school district needs to lose teachers, which are our most valuable resource for educating our children, it does provide this option. All of us, however, need to make sure that local school boards have proven techniques to hire new teachers. So far, few localities have indicated whether they will take advantage of this local option.

To be frank, this vote is only one step in an uncertain process. The budget reflects the revenue estimates from December 2008. Revised estimates based on actual January revenue figures are expected to be announced this week, which will give us an updated and more complete picture of how state revenues are performing. The economic outlook continues to weaken since mid-December, and many predict additional cuts will be necessary in the budget. In particular, based on how poorly the national economy is performing, we expect that the funding available for education, public safety, and health care will be even less than we thought two months ago.

An additional wild-card in the budget process is the federal economic stimulus package.

The bipartisan compromise reached last week will allow Virginia to offset the continuing state revenue drain. The package focuses federal resources on tax cuts for individuals, additional unemployment payments, additional funding for health care and education, and job creation.

Based on the latest figures, Virginia can expect to receive about $4 billion in funding. More than $1 billion of this funding will be directed to K-12 education, including special education and technology. Another $700 million will help us address our crumbling roads and bridges, with another $100 million for improved transit.

The governor has launched a Web site -- www.stimulus.virginia.gov -- where anyone can offer their ideas and suggestions for projects that should be considered for funding. The governor has reached out to legislators and their staffs, as well as experts in his administration, to make sure we use the money in ways that best serve our citizens -- with accountability and transparency.

Unfortunately, because of the need to balance the budget, Virginia's ability to stimulate the economy through targeted economic development investments is limited. For example, the House budget does include $3 million in additional funding to promote Virginia's tourism industry, providing an immediate stimulus to Virginia's economy. This funding includes $700,000 for film incentives to lure production of certain movie and television projects to the state, bringing the total film incentive program to $900,000 per year.

However, this amount pales in comparison to our competitor states for these projects. Thirty-nine states have film incentive programs, including Virginia's top competitors: Maryland, North Carolina, South Carolina, Pennsylvania, and West Virginia. Most of these incentives are in the millions of dollars. For example, Pennsylvania provides $75 million in film incentives. As a result, Virginia has lost 10 major film projects to other states, at a cost of approximately $356 million, since 2006. We stand to lose an additional $273 million in projects in 2009 alone.

As the chairman of the House Appropriations Committee stated when presenting the House budget, this is a "half-time" budget. However, in the second half, the rules will change, new players will come to the field, and the game may look completely different. In any event, we must find a way to balance the budget in a way that helps Virginians weather the current economic storm. Stay tuned.

Jennifer McClellan is a Democrat who represents Virginia's 71st House of Delegates District, which includes parts of Henrico and Richmond. She may be contacted at DelJMcClellan@house.virginia.gov or (804) 698-1071, and she has a newsletter available at www.jennifermcclellan.com.