Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, October 14, 1993 TAG: 9312030382
SECTION: EDITORIAL PAGE: A15 EDITION: METRO
SOURCE: Ray L. Garland
DATELINE: LENGTH: Long
In May, state Sen. Hunter Andrews, chairman of the Senate Finance Committee, warned of a shortfall in revenues to meet known commitments in the 1994-96 budget of $786 million. That assumed no new programs; no salary increases for state employees; no major construction projects other than highways; and no new federal mandates.
More recently, Wilder has been operating on the assumption that cuts in some existing programs, such as higher education, would have to reach $500 million to close the gap between anticipated revenues and unavoidable costs in the biennial budget beginning July 1, 1994.
There is, of course, a legitimate question as to the reality of that $500-million deficit. The chairman of the House Finance Committee, Del. Dick Cranwell, has challenged Wilder's pessimism with claims that a reviving economy will close most, if not all, of the gap. That view is supported by the fact that growth in state revenues this year has been far stronger than anticipated.
Economic projections are, of course, a dime a dozen, but a consensus is emerging that the country has turned a corner and can look forward to more robust growth. A good leading indicator is help-wanted advertising in newspapers, which has shown substantial growth everywhere except New England and the Pacific Coast. The South Atlantic region, which includes Virginia, had the largest increase of all.
But Crestar Bank's recent quarterly index shows Virginia's economic recovery lagging the nation's, which may be a reflection of the state's sensitivity to cuts in defense. That more pessimistic view would be supported by the staggering increase in the number of Virginia families receiving food stamps, which rose by 70 percent from 1988 to 1993.
For what it's worth, my sense of the economy is that Cranwell is more likely to be right than Wilder. That is, the state can expect sufficient growth from existing taxes to fund existing commitments without confronting a crisis choice between new budget cuts or new taxes. For one thing, recently increased federal taxes have taken the pressure off Congress to restrain the growth of spending. We may now expect the entire Democratic leadership in Washington to do all it can to stimulate growth leading into the '94 and '96 elections.
Comparisons between federal and state spending may not be very relevant, but Virginia's budget increased by 110 percent between 1984 and 1994 - from $7 billion to $14.7 billion - while federal spending grew by only 80 percent.
That is partially explained by the new congressional wisdom of passing more costs through to the states and private employers. Medicaid, which pays health bills for the poor, is a prime example of this. Virginia taxpayers shelled out $210 million to pay the state's share of this program in 1984 compared with $900 million in the current fiscal year.
But Medicaid isn't the only program where costs must inevitably rise with the numbers. After many years in which public-school enrollment in Virginia was flat or actually declining, it has started growing, and not insubstantially. From 1984 to 1994, enrollment grew by 80,000 pupils. Over the next six years it is projected to grow a further 160,000. In the same period, enrollment in state colleges is predicted to increase by 65,000. Also with a big finger in the budget pie is the Department of Corrections, which projects 28,500 state prisoners in 1999 compared with 21,000 now.
In their first televised debate, Terry and Allen were pressed to explain how they could reconcile the equation of campaign promises plus the state's existing commitments, minus no new taxes. Both were quick to change the subject. Terry kept falling back on "this campaign is about trust" while Allen said more than once that his first official act would be to name a panel of outside experts to examine state government from top to bottom with an eye to streamlining.
Judging by what has been done routinely in private enterprise, a thorough management study of all state operations, if fully implemented, should save at least a billion a year. But such studies are costly and controversial. A Gov. Allen might be reluctant to ask for enough money to do the job properly, and he might not get it from the General Assembly even if he did ask. And all major proposals changing the status quo are sure to be resisted by entrenched bureaucrats and their friends in the legislature. But this is something that should be done before Virginians are asked to pay substantially higher taxes.
In the context of a $16-billion budget for 1994-95, even relatively large tax increases don't seem to make a big difference. Raising the state sales tax from 4.5 cents to 5 cents would raise an additional $250 million. Creating a new income-tax bracket of 6.75 percent (up from 5.75) for incomes over $50,000 would bring in $175 million. Another 4 cents on the gasoline tax would get you $140 million. Increasing the maximum corporate income tax from 6 to 7 percent would raise $50 million, while another 75 cents on a carton of cigarettes would produce only $37 million.
It would be an interesting experiment to raise the lot and see if tax consumers would be any happier at the end of the next governor's term. But they wouldn't and that's not going to happen. Aside from small increases in highway taxes, which both candidates have been careful not to rule out, the taxes we have now are the taxes we'll have when the next governor exits in 1998.
The challenge will be to show that state agencies and educators can make more efficient use of the vast resources already placed at their disposal, representing almost $2,500 a year for each citizen of the commonwealth.
\ Ray L. Garland is a Roanoke Times & World-News columnist.
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