Virginia's 39th House District
Vivian's Views: The Economy
My Commitment to You
Fiscal integrity. Maintain Virginia's AAA bond rating. Don't raid education, Medicaid funding, environmental clean-up, funds for transportation. Create jobs.
how national news plays out in Virginia
The continuing threat of federal budget cuts plagues Virginia’s economy. We benefit more than any other state with 30% of our economy driven by federal contracts and jobs. Therefore, we could lose more and the looming uncertainty of whether we will plays out in a number of ways:
- Unemployment: National unemployment dropped from 7.3% to 5.5% in the last 2 years (through 2014), while Virginia’s barely changed, hovering at 4.9%. Businesses in Northern Virginia and around the military presence in Hampton Roads are very cautious about expanding.
- Economic growth: Virginia’s economy is flat compared to 2.2% growth nationwide in 2014.
- National rankings: Virginia’s slipped from the #1 best state to do business 5 years ago to #12 today, largely because of our economy and lack of transportation investment. We may be further down-graded because of public policy instability, which boiled over in the refusal to confirm a governor's Supreme Court appointment for the first time in 114 years.
Virginia's challenges are very different from the federal government's. Our budget must be balanced. We can't run up a deficit ...we can't print money.
Therefore, every time we pass a budget, we must project what state tax revenues will be more than 2 years out. Typically, we underestimate income rather than over-commit spending ...Virginia is not California. In fact, Virginia consistently is ranked at the top of all states for the quality of our economic management.
State revenue reports finally turned around in mid-March 2015, giving us a $538.5 million budget surplus, instead of the $2 billion shortfall we faced if we hadn't made hard cuts in September 2014 to education, nursing homes, law enforcement, and state agencies across the board. By law, this surplus goes to replenish the Rainy Day Fund -- which had fallen to less than 1/4 million from over $1 billion in 2007-08 -- and 10% for infrastructure to improve water quality. Almost 60% of the increased revenue that produced the year end surplus came from non-payroll individual income tax payments. We don't know at this time whether those payments reflect robust stock market capital gains prior to July 2015 or whether they reflect the recovery of small business entrepreneurs and consultants. The tax gain from increased payrolls was much more modest.
creating new jobs
Continuing to diversify our economy is critical. Governor McAuliffe has been a dynamo bringing in new jobs. In his first year, he brought twice as much business investment into Virginia than any Governor ever has. The pace continues with over $7.5 billion brought in to date!
Virginia has great potential to expand high-paying jobs: strong universities, community college workforce development, low taxes (44th per $1000 of personal income and the 2nd lowest employer unemployment tax in the nation), and access to world markets.
Congestion is the greatest impediment to expanding Northern Virginia high-paying jobs, while broad-band internet access is the greatest infrastructure need for areas of the state where there is widespread double-digit unemployment. If we can avoid extremely restrictive stem cell restraints, bio-tech research potential is extremely strong and large pay-offs can come from start-up grants, wet lab construction, and business/academic partnerships.
Finally, Virginia is well-situated to expand green energy related employment from off-shore wind energy to alternative biofuel research centered in Blacksburg and fossil fuel rich Appalachia. We must actively compete to be part of an east coast highspeed rail corridor.
preserving existing jobs
We need to help small businesses through increased access to business loans, reducing government paperwork, increasing state and local outreach to bid on government contracts, and dealing with health insurance.
Some believe job stimulus programs should just target public construction projects. As critical as transportation needs are, a nursing home job, a state police position, a teacher, etc., etc. are just as important as a construction job. If state or local governments do not have funds, these jobs will be cut.
the challenge of poverty
Virginia has one of the greatest spreads between wealth and poverty of any state. Despite long-standing poverty, welfare reform in 1996 cut by half the number of Virginians qualifying for TANF (Temporary Assistance for Needy Families). The amount families receive has only been increased once in 23 years.
The most crucial need is to expand Medicaid to cover 400,000 Virginians – 70% of whom work but earn less than $32,000 for a family of four or $15,302 for one person. Beyond the humanity of expanding healthcare, here are the dollars and cents facts:
- Adults whose only source of health care is the emergency room drive up hospital costs and insurance rates for all.
- Expansion would use managed care to prevent problems from getting worse and more costly to treat, as well as under-cutting a wage-earner’s ability to support his or her family.
- Virginians have already paid the federal taxes to fund expansion and are getting nothing in return. In fact, we are losing between $4 and $5 million a day.
- Expansion would create over 30,000 jobs.
- We cannot attract employers into rural areas where hospitals are closing.
how bad has Virginia been hit since 2007?
When we began cutting state spending in 2007, well-before most states faced reality, Virginia was 37th in state spending per person. Therefore, ultimately, we had to cut basic programs, including local public schools which still receive less per pupil in 2015 than in 2009. Even though Virginia spends less than almost every other state on Medicaid, 15% of state taxes go to match the federal Medicaid dollars we receive. Indeed, public safety is the only area of state spending where we exceed national averages. Of great importance, about 50% of the state budget goes to local governments for schools, jails, mental health, emergency services, police, and car tax relief. Cutting such state support to localities puts severe pressure on local real estate taxes.
Fiscal integrity must be maintained which has earned Virginia our long-standing AAA bond rating and rank of best-managed state. Open processes with full discussion of alternative economic viewpoints and actuarial projections are essential – no blue smoke and mirrors.
Maintaining adequate transportation funding through fees on all users is essential. Beneficiaries of transportation improvements should bear the cost and it is wrong to raid the General Fund at the expense of public education, mental health, nursing home care, environmental protection, or job creation initiatives.
Cuts in state funding for local governments must be equitably applied and not single-out Northern Virginia. I'm a "numbers person" and know the devil is in the details. I will use my tenacity and knowledge of funding formulas to make sure that Fairfax County is not unfairly impacted by population caps or cost-of-living manipulation in proposals to change state funding for K-12 education, court functions, mental health, or social service delivery.
Our $52 billion FY15 annual approved budget is split between 2 funds. The General Fund is $19 billion and used to pay for basic state government operations. 35% goes to pay for K-12 education, followed by state expenditures for Medicaid (14%); police, courts, and prisons; higher education (6%); mental health and other human services; and car tax relief (3%). Money to fund these programs comes from sources everyone pays: individual income taxes (65%), the sales tax (20%), business taxes, lottery and ABC store profits, liquor and cigarette taxes, and court fees).
Most of the rest of the budget – $33 billion in the Non-General Fund – comes from and goes to specific areas. Federal dollars must be used for programs such as Medicaid (41%). College tuition payments and hospital charges go to the institutions (23%). The gas tax and vehicle fees are designated for transportation.
Since 2007, Non-General Fund revenue has increased substantially more than General Fund as we dealt with the economic downturn by increasing fees (especially tuition) not raising taxes as many state did. In addition, the 2013 transportation funding increases are all Non-Ggeneral Fund.
- Eliminated the estate tax (2007)
- Cut the food tax 2½ cents (as of July 2005)
- Increased state income tax personal deduction to $900 instead of $800. (2006 Tax Year)
- Increased the 2.5¢ per pack cigarette tax to 30¢ (March 2005)
- Closed major corporate tax loopholes regarding holding companies. (July 2004)
In the decade from July 1999 to July 2008, the general fund budget grew 80%. However, taking inflation (29%) and population (12%) growth into account, the actual growth was 23%.
The three largest State spending initiatives were:
- setting aside money for a Rainy Day Fund
- growth in Car Tax Relief from $220 million to $950 million where it’s been capped
- use of general tax funds for transportation which grew from $44 million to $150 million
These three areas of increased spending totaled $1.2 billion or about 7% of the total General Fund budget.
Other areas that grew more than inflation and population:
- The Medicaid inflation-adjusted increase was 53%.
- This was slightly more than the 48% inflationary growth in medical care because Virginia significantly increased the number of children of the working poor covered by insurance. Matching funds for Medicare Part D also increased state spending.
- Federal mandates including
- No Child Left Behind Act and special education funding requirements,
- environmental programs such as the Clean Water Act,
- enforcement of court-ordered child support payments, and
- the Real ID Act
- The Tobacco Master Settlement Agreement brought in more that $581 million since the program began in FY2000 to be used for replacement job creation and health.
- Debt service fund grew 134% to $244 million reflecting the State's increased issuance of bonds used mainly for construction-related expenses for toll roads and universities.
We also increased state funding to reduce waiting lists for mental health and mental disability services. In addition, we increased the state share of funding for local schools to better reflect what localities actually pay.
The higher education fund increased 108% to $5.15 billion (14.3% of FY08 budget) is explained by a combination of enrollment growth, increased tuition and fees, and increased revenues at university hospitals. For example GMU general fund appropriate grew from $86 million to $151 million.
I believe it is important to balance the budget but still be able to wisely spend the state's money to improve transportation, keep class sizes low in our schools, provide the resources that our law enforcement officials need to keep our communities safe, protect our natural resources, make sure everyone has access to the higher education and health care they need, and keep taxes low for its citizens.