The next General Assembly session is scheduled to start on January 9th. One of the pre-session activities is the submission of the Governor’s Budget proposal in December. Last week Governor Northam presented his proposed budget amendments to the two-year budget to the joint House and Senate Finance and Appropriations Committees. The General Assembly will consider what the governor has offered as we set out to craft our own amendments to the two-year budget.
Unfortunately, the governor’s budget is based on allowing over 600,000 middle-class taxpayers to pay higher taxes. The budget assumes $1.2 Billion in higher taxes that the General Assembly has not approved. I cannot support a budget with billions in new spending, on the backs of the middle-class families who are struggling to make ends meet.
The governor has proposed $2.2 Billion in total new spending, including $1.6 Billion in recurring spending. In fact, the governor is proposing more new spending in the second year of the budget than was included in the entire two-year budget originally passed last session. While my colleagues in the House and I are eager work with the governor on areas of agreement, I am wary of the long-term and recurring nature of the commitments he is proposing.
Some of this spending, like proposed additional investments in K-12 education, are worth discussing. But in other cases, the governor is proposing installment plans on multi-million proposals that extend long after his term is over. It’s highly unusual to see this level of spending proposed in the middle of the two-year cycle. While we must always be looking toward the future, we cannot make promises that we cannot afford.
The need for caution is especially true given the status of our bond rating and that many economists foresee an economic slowdown in the not-too-distant future. A recent report from Old Dominion University says that Virginia is still too reliant on federal spending. We must diversify our economy and begin preparing now for the next recession.
Just six months ago, the rating agencies applauded our fiscally-responsible approach to budgeting. Our AAA bond rating was reaffirmed because we committed $1 billion to two state savings accounts; this was a prudent and responsible step.
Despite boasting about his commitment to increase the size of the Cash Reserve Fund to guard against either an economic downturn or a hedge against unanticipated costs, the governor proposes to deposit addition dollars into the fund and then simultaneously directs the fund to pay known obligations potentially totaling over $200 million dollars.
It was never the intent that the fund be used to pay for known economic development incentive grants or repay the federal government for disallowed Medicaid cost. We need to be more transparent on our commitment to fiscal responsibility and not play a shell game with our reserve funds.
Ultimately, I will work to craft a conservative, responsible budget. We will make investments where we need to, but we will also work to protect taxpayers and our state AAA bond rating.