You may have heard Bob McDonnell telling national news anchors and others that Virginia has a $544.8 million budget surplus. You may have also heard that his numbers are disingenuous. But you probably don’t have a clear explanation to give as to why if a friend or family member were to ask you about it. Well, allow us to help.
Simply, this “surplus” was achieved through budget gimmicks and accounting games. The combination of heavy borrowing, substantial cuts to services, federal stimulus, creative accounting, and not paying our bills has resulted in the commonwealth having a few dollars left in the bank at the end of the budget cycle. When I have $50 in my bank account at the end of the month, but thousands of dollars in late bill payments, credit card debt, and student loans, I don’t crow about my stellar financial management. And neither should McDonnell.
About $311 million of the “surplus” came from higher than expected tax revenues, which simply means that when the state estimated how much money taxes were going to bring in at this time two years ago, they made too conservative of an estimate. The remainder is money appropriated to agencies that they simply didn’t spend after McDonnell requested additional discretionary cuts from state agencies. That reduced spending on top of over $6B in cuts since the beginning of the recession has left vital programs and agencies in dire situations.
McDonnell’s tactic has been to cut the support the state government provides to local governments, leaving local governments hanging in the wind to either cut their services or come up with the money themselves to maintain day-to-day governmental responsibilities like public safety and education. So localites are saddled with the responsibilities of state government, all the while being forced to pay money up to Richmond. For example, the News Advance reports that, “Lynchburg’s most recent ‘contribution’ to state coffers amounted to more than $600,000.”
On top of all these math games, the so-called “surplus” is dwarfed by over $600M in deferred payments into the Virginia Retirement System (aka: McDonnell took a loan out of the commonwealth’s pension fund). That money will have to be paid back, with interest, in the future. Basically, McDonnell’s magic surplus is only made possible through his borrowing from current and future state retirees.
Finally, while McDonnell touts a plan for how to spend his ill-gotten “surplus”, the truth is that the majority of the funds are already committed under Virginia law, leaving few free dollars for pet projects or to alleviate severe budget cuts. The money certainly won’t be going towards the projects $800M budget deficit we’ll face next year. The Roanoke Times has a nice chart showing where the money will go. Try not to be too shocked when you can’t find paying back the money borrowed from the Virginia Retirement System on it.
So let’s review for the next time your friend tells you they saw Bob McDonnell on Morning Joe bragging about his surplus:
- McDonnell’s $545 million surplus is based on better than expected tax revenue ($311 million) and not spending money on programs we said we would. ($234 million).
- McDonnell’s math only works if you ignore the money he’s borrowed and not paid back (over $440 million) to the state employees’ pension fund.
- Virginia law requires surplus funds to be spent on pre-designated projects, which means few free dollars to make up for budget cuts or paying back the money we borrowed from current and future state retirees.
Be sure to check back with us for future responses to other misleading right-wing talking points.