Virginia Needs to Change Spending, Budgeting Habits

Spending levels aren't sustainable

With the General Assembly back in Richmond, there is hope for serious government reform that will keep the Commonwealth from facing budget shortfalls in the future. While transportation issues will likely dominate the legislative session, budget amendments, education issues and financing of infrastructure improvements will be hotly debated as well. The landscape is much different this year than it was the same time last year.

The talk of deficits is gone, as legislators face a surplus of at least least $918-million.

It is critical that the General Assembly seize this opportunity to bring fundamental change not only to how the Commonwealth spends money but to how it budgets for it.

The rapid growth of Virginia’s budget is well documented-in just 10 years it has increased more than 75 percent-averaging 16 percent each biennium between 1996 and this budget cycle. When looked at on an annual basis, the budget has more than doubled! The Commonwealth enjoyed a surplus at the end of the last fiscal year of $324 million. While a portion of the surplus was, by law, channeled into the rainy day fund, most of the rest was quickly gobbled up by additional state spending. Now the Commonwealth is faced with a surplus-$918 million-and additional spending may swallow the surplus whole.

To put it simply, this kind of spending is not sustainable. Spending must be more carefully analyzed and controlled. If not, more and larger tax increases will be needed to continue to “feed the beast” of state government.

Government should not and cannot, over an extended period of time, grow faster than the families and the communities that support them. Savings need to be found in some areas and spending must be restrained in others. There is hope.

The bipartisan Cost Cutting Caucus headed by Del. Chris Saxman, R-Staunton, has submitted several bills aimed at reforming how the Commonwealth goes about its business.

Perhaps one of the most promising is the HB 2441, known as the Performance Review Act which would require a top-to-bottom review of state agencies and programs in the first year of each new gubernatorial administration. Among other things, the review will focus on effective program management, performance-based budgeting and on the prioritization of resources and programs.

A similar review ordered by California Gov. Arnold Schwarzenegger resulted in a reorganization plan and 1,200 recommendations that projected savings of as much as $32 billion over five years. In addition, the state of Texas has used a biannual review of that government, and implemented many of the recommendations to strategically realign its government and save more than $3.6 billion.

Building on last year’s broad support for Saxman’s Competitive Government Act, which requires agencies to find opportunities for public-private competitions, the Cost Cutting Caucus is seeking additional public-private competition opportunities within state agencies. According to a 1999 review of state activities, there were 37,555 specific job positions that could be subjected to competition. If all of these jobs competed with the private sector, and if each job cost the state $50,000 in salary and benefits; and if the state realized a savings of 15 to 30 percent (a reasonable savings according to many analyses), the state could save between $281 and $563 million in one year alone.

These are but two government reform initiatives that will be debated in Richmond over the next 45 days-and by no means do they run the gamut of options. One thing is clear, however: serious reform is needed. The recent growth of the Commonwealth’s budget is not sustainable in the long run. The time for action is now, with a surplus in hand before we’re faced with another deficit.

Geoffrey Segal is director of privatization and government reform at Reason Foundation.