Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, June 17, 1990 TAG: 9006190367
SECTION: EDITORIAL PAGE: C2 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
Just a few months ago, the 1990 General Assembly had to deal with an anticipated shortfall of $248 million for the current fiscal year that ends June 30. Now it's announced that tax collections are likely to have fallen short by another $100 million by month's end.
That, in turn, foreshadows stormy weather for the biennium that begins July 1. Economic growth, already slowing, may lag even more, cutting deeper into tax collections. And the U.S. Supreme Court is expected to decide whether Virginia owes its large popultion of federal-retiree citizens as much as $400 million in back taxes.
In a related case in 1989, the high court held that if states levy income taxes on federal retirees' pensions, they must do the same to retirees of state and local governments. In its attempts to meet the judicial mandate, the General Assembly spread the tax favors instead of the tax burdens - which contributed to the state's present fiscal woes.
Meantime, the state will have to cut and trim programs to cope with a financial situation that could become worse. The federal government, which has been shifting obligations to the states over the past decade, is not going to take back any of the load - such as the $250 million added to Virginia's budget in 1990-92 for Medicaid costs.
And that's not all. The commonwealth finds itself in a crunch at a time when the state's economy remains comparatively strong. Indeed, the state unemployment figure for April, 3.4 percent, was the best for that month in 17 years. What happens when unemployment starts rising?
Nationally, the economic indicators are equivocal if not disquieting. The boom has been sputtering for some time, inflation shows signs of reviving, and interest rates are higher than they should be - partly a result of persistent federal deficits and the plight of the plundered savings-and-loan industry. Virginia will feel any bad effects from all that. Prudence dictates gathering the hay into the barn and preparing for leaner times.
That's something the state should know how to do. Traditionally, Virginia budget-makers have projected revenues conservatively, expenditures liberally. The result was a prudent, if unofficial, reserve. Pressing new needs could be met without resort to tax increases, while still getting across the message that profligate new outlays weren't in the cards.
Moreover, the system provided budget-makers a mechanism for waiting well into the first year of a biennium, when the fiscal picture had come into better focus, before deciding such second-year items as the size of state pay raises and capital projects.
Virginia today is not spendthrift, and an official $200-million reserve was built into the 1990-92 budget adopted this spring by the General Assembly. Clearly, though, the old practice of conservatively estimating revenues has somehow come a cropper.
Gov. Wilder must take time now from his travels to bring outlays into better alignment with income. Doubtless there still is fat to be found, but further trimming will begin striking closer to bone. In the course of promoting himself to national Democrats, the governor has been able to bask in Virginia's climate of political conservatism and reputation for fiscal soundness. Now he'll have an opportunity to add to that reputation - or detract from it.
by CNB