Cassidy: What's in Virginia's surplus?

Last week, Gov. Bob McDonnell announced that Virginia had a surplus in fiscal year 2011. But the word "surplus" turns out not to mean what many people think. It doesn't mean Virginia is flush with cash or that the state has enough money to meet the growing needs of Virginians dealing with our struggling economy.

All Virginia's surplus of $545 million really means is the state collected more in taxes than the governor or General Assembly thought we would earlier in the year, and that state agencies expended less in their budgets. Making matters worse, most of the media coverage has focused narrowly on the fact — or fiction — of a surplus and overlooked the broader and more important context of the choices we made to get there.

So how was this surplus generated?

First, we relied on federal Recovery Act dollars. The federal government has given Virginia more than $3 billion during the recession to fund education, health care and other core services, and avoid draconian cuts in those areas. But this lifeline has run out, and there is no appetite in Congress to renew it.

Second, the governor and General Assembly engaged in some creative accounting: They required businesses to remit their state sales taxes early and based on estimates of future sales; and they skipped normally required payments to the Virginia Retirement System.

Third, cuts, cuts, and more cuts:

• Virginia has slashed education funding. We reduced funding for textbooks, school buses, and support personnel such as speech therapists and guidance counselors. In 2005, Virginia had a great atmosphere for learning — the third-smallest average class size in the nation. Today, we're 41st.

   

  • We have undermined our health-care system. Though more people than ever have lost their jobs and the health insurance that went with them, Virginia has cut payments to hospitals, nursing homes, and personal-care assistants who treat Virginia Medicaid patients. Beginning last month, outpatient payments to hospitals were reduced by 4 percent, as were capital payments for hospitals and nursing homes.
  • We have neglected the road system we inherited from previous generations. The state Department of Transportation reports that more than 3,000 bridges are "functionally obsolete" and 1,700 others "structurally deficient."
  • We have put the safety of our families and communities at risk by failing to provide needed funding for our public safety workers to have the tools they need. Our police, firefighters, EMTs and corrections officers have seen their funding cut by more than a third. Certainty that first responders will arrive promptly and with enough equipment and manpower to respond to a crisis is essential if we're going to have communities where people want to live and businesses want to operate.

  Every state has suffered from drastic cuts in this difficult time. But Virginia's decision against a balanced approach that would have raised some revenue to reduce the size of the cuts has made things more difficult. A cuts-only approach hurts struggling families, stifles job creation, and takes Virginia off the path of building a strong economy — a path followed for generations by leaders from both parties.

  Most importantly, surplus or not, Virginia is looking at a significant shortfall between expected revenues and what it will cost to meet our needs for the coming budget that starts July 1, 2012. How significant?

  State revenues are not rebounding to the levels necessary to meet our current budget requirements, let alone the growing needs of Virginians struggling to deal with our economic downturn. Annual revenue growth had been tracking around 5.8 percent. While that's higher than the 3.5 percent growth rate the governor and legislature predicted, which is why there was an official surplus, it is far below the nearly 9.5 percent growth that would have been required just to get back to 2007 levels of revenue. As a result, Virginia faces a shortfall in excess of $800 million for the coming budget.

  To most of us, a surplus implies that after paying for everything — our bills, our mortgage, our kids' schoolbooks and weekly groceries — there's money left over. That isn't the kind of surplus we have. A few extra dollars at the end of the year is nothing to brag about if, to get there, we neglect leaks in our roof and cracks in our walls, stick a rent bill in the drawer to pay another day and renege on paying for our children's education. But that is what Virginia has done over the past few years.

  So, surplus? Technically, yes. But we made costly choices to get there, and we're not out of the woods yet.