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In Virginia, We (Only) Get What We’re Willing to Pay For

March 15th, 2010 . by economistmom

It’s the same situation in all states, actually.  Virtually all state governments have some sort of “balanced budget requirement.”  (See Table 11 on pages 40-41 in this report of the National Association of State Budget Officers (NASBO).)  The constraints take on a variety of degrees of stringency, but empirical evidence suggests they do bind (i.e., matter).  Even in Vermont, the only state that doesn’t have any sort of balanced budget requirement, the NASBO report indicates that “in practice, a deficit has not been carried over.”

So in Virginia (where I live and work), we’re now offered a little insight into what balancing the budget entirely on the spending side looks like, with this report in today’s Washington Post (emphasis added):

RICHMOND — The Virginia General Assembly adjourned its annual legislative session Sunday evening after adopting a two-year, $82 billion budget that cuts millions from education, health care and public safety — curtailing state spending more aggressively than any in generations while fulfilling the new Republican governor’s promise not to raise taxes.

The trade-off for holding firm against a tax increase to plug a $4 billion hole was a spending plan that cuts deeply into virtually every area of state responsibility.

“We tried to keep our word,” said House Majority Leader H. Morgan Griffith (R-Salem). “We knew times were tough, but the state has to live within its means, just as families have to live within theirs.”

Funding for schools will drop $646 million over the next two years; the state will also cut more than $1 billion from health programs. Class sizes will rise. A prison will close, judges who die or retire won’t be replaced and funding for local sheriff’s offices will drop 6 percent.

Only 250 more mentally disabled adults will receive money to get community-based services, in a state where the waiting list for such services numbers 6,000 and is growing. Employees will take a furlough day this year, the state will borrow $620 million in cash from its retirement plan for employees and future employees will be asked to retire later and contribute more to their pensions.

Medical care providers will see Medicaid payments from the state trimmed, and fewer poor children will be enrolled in state health care, although those health cuts could be tempered by anticipated federal funds. Funding for the arts and public broadcasting will be cut by 15 percent over two years.

Thank goodness the federal government is able to run a deficit in bad economic times like these, otherwise there would be no social safety net at all.  But I don’t mean to say thank goodness deficits occur at all times.  In my mind deficits at the national level are justified and even wise under two types of circumstances: (i) as treatment for a temporary emergency–be it a war, a natural disaster, or an economic recession; or (ii) in order to fund economically-fruitful investments that pay off over the course of several years in a broader net social benefit, not just private benefit, sense–investments that otherwise couldn’t be funded if annual deficits were not allowed.

Much of federal deficit-financed spending (and tax cuts) of course does not fall under these two categories, which means we shouldn’t be so grateful for the federal government’s seemingly unlimited capacity to borrow at all times (good or bad) and for all sorts of things (wise investments or wasteful spending).  And that’s why the President’s fiscal commission is a good idea.  But the Virginia example may provide a little window into what the federal government would look like if Congressman Paul Ryan, newly named to the fiscal commission and the author of a plan to balance the budget entirely on the spending side, got his way.  What Virginia will be cutting looks like a lot more than just “waste, fraud, and abuse.”  But I guess I’m supposed to be happy about my taxes staying low, and people like me who (at the moment) have good jobs and income and health aren’t supposed to think that “there but for the grace of God go I” when we see our fellow citizens losing their safety net just as they’re falling.

I’m not so sure the motto “Virginia Is For Lovers” is very fitting… unless it refers to loving low taxes.

4 Responses to “In Virginia, We (Only) Get What We’re Willing to Pay For”

  1. comment number 1 by: BillSmith

    Look at New Jersey’s budget that was just submitted.

  2. comment number 2 by: James Corbin

    The problem is NOT a balanced budget in Virginia, but the same problem that happens with any government. When the good times are rolling, politicians will think of all sorts of new projects that the increasing tax revenues can be used for. They virtually never save any for a rainy day or think much about giving it back to the taxpayers. When cuts need to be made, rarely are the new projects implemented during the boom years the first ones to feel the axe.

  3. comment number 3 by: Shadoman

    Too bad economistmom. When the economy was running on all cylinders, the federal and state governments couldn’t wait to spend more of OUR money. Now that they don’t have a neverending revenue stream, they need to tighten their belts and cut spending. And those of you who seem to relish relying on the government to solve your woes need to grow up and assume your own responsibilities. No more free mooching off of the rest of us hard working people.

  4. comment number 4 by: Hoo

    I love my low taxes and I love Virginia. Virginia is a perfect example of the Tiebout model. If you prefer to move in a higher tax, higher service state, then move to Montgomery Cty Md.

    I don’t like the budget of the City of Alexandria but overall it’s worth it to me so I don’t want to move. Hopefully Virginia continues to offer a wonderful difference to Maryland, which is heading for a fiscal meltdown especially Montgomery Cty.