Senator McDougle’s Weekly General Assembly Session Update
With the General Assembly bustling this week over lengthy committee meetings, longer floor sessions and more substantive bills, my colleagues and I prepare for “Crossover” next week on Tuesday. Crossover is the day by which the Senate and House must act on bills that originated in their respective chambers. As we review legislation, a balanced state budget continues to be at the forefront of our minds as we face an increasing shortfall. I wanted to give you an overview of the budget process and let you know what my colleagues and I are doing to resolve the challenges we face.
Budget Overview
The compilation of a state budget is a process that takes months to complete and begins long before the start of the legislative session. In Virginia, every two years the Governor is required to prepare a budget over the summer and fall and submit his spending plan to the legislature by the third week in December. The budget is a biannual appropriation, meaning it determines spending for two years. During odd-numbered years, the Governor submits only adjustments to the existing budget for the General Assembly to review. Those proposed adjustments are now under consideration by the Senate and the House.
Steps in the Budget Process
Once the Governor’s changes are offered, they are reduced to a “budget bill” in each chamber (the Senate and House of Delegates), which is subject to the same process as any other legislation. Senators and Delegates can offer amendments to the bill and they are considered by the Senate Committee on Finance and the House Committee on Appropriations, respectively. Once each committee reviews and accepts any proposed changes, the bill is amended and moves to the full Senate and House for a vote. Changes are seldom made once the budget bill is debated by the full Senate and House, but amendments can be offered yet again. Once the Senate and House approve respective versions of the budget bill, each is sent to the opposite body for consideration. At that point, amendments in total are rejected and the two bills are placed into a committee of conference where a group of five Senators and six Delegates works to resolve the differences in the two bills and develop a consensus report. This report must still be voted on and passed by the Senate and the House. The budget then goes back to the Governor for one last review.
Common-Sense Budgeting Principles
This Monday, a long-time budget conferee and senior Republican member of the Senate Finance Committee offered remarks on the Senate floor outlining three budgeting principles that should be employed:
Principle 1: Realistic revenue estimates
Last year, all nineteen Republican Senators opposed the budget due to our concern that it was based on overly optimistic revenue estimates. Unfortunately, our fears were correct. This year, the Governor assumed the current recession would end in the first quarter of fiscal year 2010. He based his budget on a projected shortfall of $2.9 billion when many experts, including Senator Dick Saslaw, the Senate Majority Leader, argue it will be closer to $4.0 billion. If sales tax receipts fall off, unemployment increases, or income tax returns are lower than expected, the size of the shortfall will swell.
Local governments and agencies depend on us to tell them how much money they will receive. If we base a budget on inflated revenue estimates that do not come to fruition, we will have to ask all agencies to cut their budgets again in a few months. The revenue estimates process cries out for reform. This year I proposed legislation that would require the Governor to provide the General Assembly with alternative revenue projections so that we may better understand the outside limits of our fiscal situation as we work to craft a budget. This legislation has passed the Senate and is awaiting action in the House of Delegates.
Principle 2: Contingency spending
Republican Senators also introduced a concept of “contingency spending” as a means for addressing the uncertain revenues. The idea stems from the concern that the Governor is going to insist the shortfall will only be $2.9 billion and the Senate will be required to base its budget on the Governor’s revenue estimates.
The concept of “contingency spending” means that we create a budget that is based on a more aggressive estimate of the revenue shortfall. After we craft that budget, we allocate the over $1 billion difference in “contingency”, thus the money will only be spent if the funds become available. Should the shortfall be greater than the Governor estimates, we would not have to ask agencies to make additional mid-year cuts, nor would the incoming Governor and General Assembly have made unrealistic spending promises to localities and agencies. If, on the other hand, the Governor’s estimates are proven to be correct, the General Assembly could appropriate the additional funds.
Principle 3: Limited use of potential federal stimulus funds
As we consider tough choices about the state budget, some are focusing on a federal stimulus program in which Virginia could receive upwards of $5.6 billion. During a budget shortfall, it may be attractive to simply use this money to close the gap. I disagree with that course of action and instead believe those funds should be used for one-time expenses such as infrastructure projects (school construction, roads and bridges, rural broadband) or to provide incentives for the purchase of homes and/or automobiles to stimulate these markets. If the General Assembly uses stimulus dollars to help balance our budget, we are using one-time dollars to fund ongoing expenses. This is comparable to using a one-time work bonus to enter into a 30-year mortgage. Doing so would likely result in more severe cuts next year when we will not receive federal assistance.
Looking Ahead
With the Governor having announced a two-week delay in revenue estimates, yesterday Senate Republican leaders suggested that work on the budget be postponed two weeks. This deferral would allow us to obtain updated revenue numbers and give us a better idea what the federal stimulus package will provide, including what “strings” may be attached. Following the Republican initiative, Senator Charles Colgan, chairman of the Senate Finance Committee, suggested only working on the fiscal year (FY) 2009 budget for the remainder of this session and returning in the spring to update the FY 2010 budget. These are only ideas right now; no decisions have been made or voted upon yet.
Although the state of the economy and Virginia’s current budget shortfall is discouraging, my colleagues and I will work diligently to craft a constitutionally mandated and balanced budget for the citizens of Virginia. We are grateful for your support of our efforts and I will continue to keep you updated on new budget developments.