On Saturday, the Virginia General Assembly passed the budget, which is more reliant on the stimulus funds than it is on actually fixing the budget. Of course, Governor Tim Kaine is declaring victory, since 7,100 jobs have been saved. However, this does not address the long-term solutions that face Virginia’s fiscal situation in the year ahead.
According to the Richmond Times-Dispatch, the House voted 90-8 on the budget, and the Senate voted 35-5 on the measure.
Lieutenant Governor Bill Bolling released a statement indicating that this was only a short term solution that does not address the budget from a long term perspective.
“Needless to say, this has been a challenging budget year, with the Commonwealth facing a deficit of $3.7 billion. To address this shortfall we were facing significant spending reductions for most state programs. It appears as though the infusion of some $4.5 billion in federal stimulus funds will enable us to restore many of these budget cuts, at least in the short term. Given the significant infusion of funds provided by the federal stimulus package, I think the General Assembly did a good job crafting amendments to restore many of the budget cuts that had been made in the Executive Budget.
“However, I fear that this is a short term solution to a long term problem. While the Constitution of Virginia requires the Commonwealth to adopt a balanced budget, this budget is only balanced because of the extensive use of one-time revenues, such as those obtained from the federal stimulus package; the accelerated collection of the state sales tax from retailers; and the conversion of money that had been earmarked for one-time capital projects to long term debt.
“In addition, I am concerned that this budget is balanced by the inclusion of an overly optimistic revenue projection of 4.5% in the second year of the biennium which begins on July 1, 2009. While I hope that robust economic growth will return this year, the fact is that most economic indicators project continuing economic decline in the short term. If we fail to meet these overly optimistic revenue projections we could face significant budget shortfalls again next year.
“By relying on one-time federal funds and overly optimistic revenue projections to balance the budget, we are not addressing the fundamental structural problem in the budget. Simply put, we are spending more money than we are taking in and we cannot continue to do that. Unless we see significant economic growth over the next 18 months, we will once again face massive budget shortfalls when the federal stimulus dollars expire, other one-time budget balancing actions are repealed and revenue projections are adjusted to reflect economic reality.
“Going forward, our full attention must be directed toward effective proposals to get our economy moving again. We can do that by reducing taxes for families and businesses, eliminating unnecessary regulatory burdens, directing more resources to aggressively recruit new business and industry to Virginia and empowering the private sector to unleash the entrepreneurial spirit of America. That is what will ultimately get our economy moving again, not continual financial bail outs from Washington.”
Taking money from the stimulus is only a temporary fix, and in order to address the fiscal woes from a long term perspective, we need to eliminate wasteful spending, eliminate unnecessary programs, and become more creative in addressing ways to cut costs. Richmond and the rest of the nation needs to realize this, and once they do, the economy will eventually turn around. At first, it will be rough, but the positives from this move will far out weigh the negatives.