Schapiro: Spoils limited for victor in Virginia governor’s race

Regardless of the outcome of Tuesday's gubernatorial election -- OK, so a lot of people have a pretty good idea who's going to win -- one thing is certain: The victor won't have squat to spend.

Tight money, perhaps the tightest since the Great Depression, combined with a divided JEFF E.
SCHAPIRO
statehouse could guarantee impasse, at a minimum, on the new governor's initiatives.

For example, Republican Bob McDonnell wants to pay for roads, in part, with the taxpayers' credit card by issuing billions in bonds, repaid with interest.

Problem is, the state is bumping up against the self-imposed ceiling on debt-backed financing: that annual bond costs not exceed 5 percent of revenue.

Another obstacle to McDonnell's pave-now, pay-later plan: As revenues, down another $1.5 billion, continue to fall -- and they will -- the state will be compelled to ease up on bonds, not having the required-by-law cash to underwrite them.

No wonder Democrat Creigh Deeds is open to higher taxes. But that's a message no one wants to hear.

The strictures on bonds are intended to preserve Virginia's triple-A credit rating, the highest possible and shared with only six other states.

This badge of honor -- the state was once so debt-phobic that, into the 20th century, outstanding bills from the Civil War took precedence to schools -- was imperiled on the watch of Virginia's last Republican governor, Jim Gilmore of no-car-tax fame.

It was saved during the term of a Democrat, Mark Warner, but only after he broke his no-new-taxes promise -- with no help from an anti-tax delegate: Bob McDonnell, now the heartthrob of a corpocracy that strongly backed Warner's tax rise.

If the state budget is ordinarily a plan for progress, in these extraordinary times it will prove a labyrinth of limitations -- a point explored by Jim Regimbal, a former budget analyst, in a report last month for U.Va.'s Weldon Cooper Center for Public Service (http://www.coopercenter.org -- click on Virginia News Letter).

Beyond a further slide in tax revenue, the time bombs, Regimbal notes, are numerous:

The loss in 2011 of a temporary cushion for Medicaid: $1.5 billion in federal stimulus funds. And with Medicaid costs swelling 8 percent a year, the state will need almost $2 billion to plug the hole partly filled by Obama bucks. Revenue growth won't do it.

Cutting Medicaid is easier said than done. Virginia's program is among the most parsimonious in the nation; it has few bells and whistles. One is mental-health coverage, which Republicans have long sought to expand.

And then there's the public-employee pension fund. Its costs are rising; investments falling. Both McDonnell and Deeds balk at shifting a sliver of the bill to workers.

Remedies such as job growth require investments Virginia can't afford, such as education. Sell ports, liquor stores and the lottery? Post-VITA-Northrop Grumman, outsourcing actually has to work and raise cash.

There are some big, potential -- short-term -- savings: Suspend all or part of $1 billion in car-tax relief, $400 million in credits for preserving the countryside and historic buildings, or $280 million in estate-tax repeal.

Doing so requires political willpower. There may be less of that than there is money.

Contact Jeff E. Schapiro at (804) 6496814 or . Watch his video column Thursdays on TimesDispatch.com. Follow him at twitter.com/RTDSchapiro. Listen to his analysis Fridays at 8:33 a.m. on WCVE (88.9 FM).