Note To Cal Thomas: Virginia's Budget Surplus Was Made Possible By Stimulus Funding And "Budget Tricks"

››› ››› HARDEEP DHILLON

Citing Virginia's $500 million budget surplus, Washington Examiner columnist Cal Thomas claimed that the federal government should "emulate" Virginia Governor McDonnell's fiscal policies. In fact, under McDonnell, the state of Virginia received more than $2.7 billion in funds through the federal Recovery Act, and even The Wall Street Journal has pointed out that Virginia used "budget tricks to make the surplus appear larger than it really is."

Thomas Hypes Virginia's $500 Million Surplus As Something For Federal Government To "Emulate"

Washington Examiner's Thomas: McDonnell "Judiciously Cut Spending" To Create Surplus. In a column headlined "Yes, Virginia, there is a surplus!," The Washington Examiner's Cal Thomas called for Washington to "emulate" McDonnell's decision to "judiciously cut spending." He also advocated for the election of "a Republican president in 2012 who thinks like [McDonnell]." From The Washington Examiner:

While the federal government continues to drown in a sea of debt, several states are reporting surpluses, thanks to policies Washington would do well to emulate.

Nowhere has the economic turnaround been more immediate than in Virginia. When Republican Gov. Bob McDonnell took office in January 2010, he was faced with a $2.2 billion shortfall bequeathed to him by outgoing Democratic Gov. (and now Senate candidate) Tim Kaine.

In less than two years, McDonnell has delivered two budget surpluses without raising taxes or causing harm to the "most vulnerable." Instead, he has judiciously cut spending.

Last week, the governor's office announced a surplus of $544.8 million. That is $234.1 million more than McDonnell told the legislature on June 30 he has saved state taxpayers. Call it compound savings.

[...]

Compared to the federal economic picture, Virginia's statistics are astounding: In less than two years, McDonnell's administration reports that it has added 48,200 net new jobs. As recently as 2009, Virginia ranked 35th nationally in jobs created. Significantly, "only 8 percent of net new jobs are government positions."

Virginia's "6.0 percent unemployment rate is tied for eighth lowest in the nation," though the Washington Times reports, "the state will likely have to borrow an additional $251 million ... to pay back the federal government for loans to its unemployment insurance trust fund."

The loans were necessary because of the economic recession and the aftermath of the Kaine administration, which ran out of money in 2009 and had to visit the federal trough.

[...]

The reason Washington -- and especially the Obama administration -- has difficulty replicating what is occurring in Virginia and those nine other states is because it's incapable of abandoning a failed ideology.

When old ideologies have proven bankrupt, they are mostly discarded and replaced with something new that has a better chance of working. But the liberal ideology that government can better care for you than you can care for yourself remains on life support, though clearly it, too, has failed.

An old Virginia slogan says, "Virginia is for Lovers." A new one might say, "Virginia is for business."

Jobs created in Texas during Gov. Rick Perry's terms are receiving national attention, but Texas didn't make Pollina's list. Perhaps that's because, according to the Bureau of Labor Statistics, in Texas jobs in the private sector declined 0.6 percent while those in government increased 6.4 percent.

Should our nation's capital be moved to Richmond? Perhaps electing a Republican president in 2012 who thinks like Bob McDonnell would be easier and more practical. [The Washington Examiner, 8/22/11]

But Under McDonnell, VA Has Received More Than $2.7 Billion In Recovery Act Funds From Washington

Virginia Has Received More Than $2.7 Billion In Recovery Act Funds Under McDonnell. Since Governor McDonnell (R-VA) took office, Virginia has received more than $2.7 billion in funds under the federal Recovery Act. In the fiscal year ending June 30 alone, Virginia received more than $1.8 billion in stimulus funds. From Recovery.gov:

[Recovery.gov, accessed 8/25/11]

Moreover, Virginia's Budget Surplus Numbers Are Inflated Using "Budget Tricks"

Wall Street Journal: "It's True That Richmond Used Too Many Budget Tricks To Make The Surplus Appear Larger Than It Really Is." Even the conservative Wall Street Journal has acknowledged that Virginia's budget surplus numbers have been artificially inflated. In a piece praising Virginia for its budget surplus, the Journal wrote that Virginia "used too many budget tricks to make the surplus appear larger than it really is." From the Journal:

Here's something you don't see often these days: a government running a budget surplus. Governor Robert McDonnell announced last week that Virginia closed fiscal 2010 some $400 million in the black. That's a radically improved financial picture from a year ago when the state faced a $4.2 billion two-year budget hole.

[...]

It's true that Richmond used too many budget tricks to make the surplus appear larger than it really is. Sales tax payments were accelerated by one month to count in 2010 rather than 2011. Several hundred million dollars were borrowed from the public-employee pension reserve -- money the Governor promises to repay by 2013. Most fiscal experts think the real surplus is closer to $87 million. But given the lousy economy, Virginia's budget achievement is laudable. [The Wall Street Journal, 8/24/10]

Washington Post: McDonnell "Benefited From Some Budgetary Legerdemain," Including "His Democratic Predecessor." From a Washington Post editorial headlined "Be sure to put an asterisk on Virginia's budget surplus":

On his way to declaring a surplus, Mr. McDonnell, a Republican, also benefited from some budgetary legerdemain, and not just his own. For instance, thanks to a measure approved by his Democratic predecessor, Timothy M. Kaine, Virginia speeded up its sales tax collections from the state's 1,000 largest retailers, shifting $227 million in revenue from the current fiscal year into the one just ended. In a similar vein, Mr. McDonnell postponed $135 million in payments to the Virginia Retirement System for public employees, which were due in the last quarter of the fiscal year.

Both those maneuvers will cost the state when it returns to a regular sales tax collection schedule and repays its retirement system. Nonetheless, they allowed the governor to sidestep some extremely unpleasant budgetary choices for the time being. Without them, Mr. McDonnell would have had to raise across-the-board taxes, which he has vowed not to do, or made further draconian cuts to a budget already pulverized by the economic downturn. [The Washington Post, 7/30/10]

ThinkProgress: "Virginia 'Balanced' Its Budget And Set Up This Year's Surplus By Borrowing Money From Itself." From a Think Progress blog post headlined "State Pensions or: How Conservatives Learned to Stop Worrying and Love Borrowing":

Before everyone packs their bags and moves to Virginia, however, it's worth looking into this situation more closely. Did the state achieve its sterling fiscal situation through a balanced package of spending cuts and tax increases? Did it enact a stringent austerity budget along the lines of the Cut, Cap and Balance Act that was up for debate in Congress today?

No on both counts. Instead, let's flashback to a Richmond Times-Dispatch article from last year detailing the state's plan for balancing its budget:

Virginia is taking away more than $620 million that would have been paid toward state employee and teacher pensions, but the state is leaving an IOU.

Beginning in 2013, the state will have to repay the money to the Virginia Retirement System over 10 years, with 7.5 percent interest.

[...]

Sen. Walter A. Stosch, R-Henrico, called the provision the most important step taken by the assembly to protect the retirement system, even as it relies on deferred pension contributions for almost one-fourth of the money used to balance the two-year budget.

That's right, Virginia "balanced" its budget and set up this year's surplus by borrowing money from itself. Coming on top of $17.6 billion worth of unfunded pension liabilities, that would have been a rather audacious move for any governor to approve. [ThinkProgress, 7/19/11]

Posted In
Economy, Budget
Network/Outlet
The Washington Times
Person
Cal Thomas
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