THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, November 3, 1995 TAG: 9511030019
SECTION: FRONT PAGE: A14 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 63 lines
As an important General Assembly election has drawn near, politicians have been promising to lower taxes or increase government services - or both.
In fact, it may not be possible to do either. Before casting their ballots, voters should insist that candidates show how the numbers add up.
Many Republican candidates, for example, have embraced Governor Allen's call for a phaseout of the BPOL tax, raising the personal income-tax exemption and returning lottery proceeds to the localities.
Both Republicans and Democrats have endorsed calls by business leaders for as much as $200 million more for higher education. Many also favor increased money for elementary and secondary schools. Almost every candidate calls for more spending for prisons.
If pressed to explain how they will pay for lower taxes and/or increased services, the most common answers are (a) by cutting government waste and (b) thanks to growth in state revenues which are expected to increase by $700 million over the next biennium.
That sounds like plenty of money to cover tax cuts and spending increases, but much of the $700 million is already spoken for.
New prison expenses are estimated at not less than $232 million.
The cost of implementing state education standards already adopted is budgeted at $180 million.
The state owes $80 million to federal pensioners.
A cost-of-living adjustment for state pensioners will eat up $129 million and a 3 percent cost-of-living pay raise for state employees would add $107 million.
All of that hard-to-avoid spending comes to $728 million, more than enough to wipe out anticipated revenue gains before a single dollar of promised tax relief or new spending has been voted.
And nothing in this calculation takes into account the joker in the deck - trickle-down federal funding cuts. Yet budget-balancing in Washington could easily translate into budget busting in Richmond. Here's how.
Federal funds account for 20 percent of Virginia's budget - $3.3 billion of $16.5 billion. Cuts are coming in funds that build highways, run buses, pay for public housing and educate children. Not to mention the biggest cuts of all, reduced welfare and Medicaid payments.
The National Conference of State Legislatures estimates that states will lose between 6.5 percent and 9 percent of total federal money in 1996. And that's only the beginning. In each succeeding year, the states will lose more federal funding because the budget-balancing process is backloaded. That is, the big cuts don't kick in until the later years.
If Virginia is among the states least affected and loses only 7 percent next year, that will still come to $231 million that it will no longer be able to spend. Instead of a budget surplus in Richmond with which to fund new initiatives and tax cuts, the state could find itself forced to cope with a shortfall.
Given the budget uncertainties before us, voters will be wise to favor those candidates who approach tax cuts and spending increases with great prudence. Virginia has long prospered by exercising fiscal restraint. This is hardly the time to throw caution to the wind. by CNB