To hear some folks tell it, budget cuts in Virginia over the past three to four years have been so savage it’s a miracle there’s any state government left. We long ago cut out all the fat and hacked through the muscle; now we’re sawing deep into bone. Localities are scared stiff that the state will stiff them come January. And it’s only going to get worse. Gov. Bob McDonnell has had state agencies prepare plans cutting 2 percent, 4 percent, and 6 percent from their budgets. The stories have grown numbingly familiar.
Yet at the same time, we’re told “State Revenue Up 3.1 Percent in October.” That Times-Dispatch news story from a couple of weeks ago related how tax collections for October, 2011, were higher than collections from October the year before. Moreover, this October “marked the 19th month out of 20 that collections had exceeded those of the same month in the preceding year.”
That’s not all. Tax revenues not only are higher than revenues from a year ago, they’re also higher than state forecasts: “For the year, tax collections are up 5.8 percent. That's 2.1 percent[age points] ahead of the administration's forecast of 3.7 percent.”
Confused? There’s more. The state budget has gone up, not down, every single fiscal year since the recession hit:
Fiscal 2008: $36.004 billion
Fiscal 2009: $37.057
Fiscal 2010: $37.165
Fiscal 2011: $38.982
Fiscal 2012: $39.567
And given how fast revenues are running ahead of projections, it’s a fair bet that the pattern will continue. So why the cuts?
Partly, it’s a function of the distinction between general funds and non-general funds. General funds come from sources such as the income tax, and legislators spend them however they see fit. Non-general funds come from specific sources such as gasoline taxes and college tuition, and can be spent only on specific categories such as transportation or higher ed.
Despite the recession non-general fund revenues have done pretty well, rising from $18 billion in fiscal 2007 to $23 billion for the current fiscal year. For the general fund, it’s a different story. Revenue in that category peaked in fiscal 2007 at $17 billion, then collapsed and still hasn’t fully recovered (though, at $16.5 billion, it’s almost there).
Still: The general fund has grown roughly $1 billion from last fiscal year to this one. That represents about a 6 percent hike. So why is the governor asking agencies to plan for cuts?
Partly out of prudence. But as Finance Secretary Ric Brown explained in a conversation last week, partly because certain spending demands are rising faster than revenue. Which ones? If you guessed health care, go to the head of the class.
For example: From fiscal 2008 to fiscal 2012, general-fund outlays for the Department of Medical Assistance Services (that’s the one responsible for administering Medicaid and the state’s Children’s Health Insurance Program) have grown 35 percent. General-fund revenue hasn’t grown anything like that, so the difference has to come from the pockets of other programs.