Huge Va. budget growth over 10 years fueled by inflation, population, economic conditions

Population, inflation fuel Virginia budget growth

RICHMOND, Va. — Virginia spent 74 percent more money overall in its most recent budget than it did 10 years earlier, the result of the economy, population growth and decisions by the General Assembly, according to the legislature’s watchdog agency.

Monday’s report to the Joint Legislative Audit and Review Commission, the legislature’s watchdog agency, shows a state spending jump of 28 percent when adjusted to account for inflation and population growth from fiscal year 2000 to fiscal 2009.

The annual operating budget grew from nearly $21.4 billion for spending during the year that began July 1, 1999, to slightly more than $37 billion for the budget year that ended about four months ago.

According to the commission report, a 23 percent inflation rate forced some of the growth, as did an increase in Virginia’s population from 7.1 million in 2000 to 7.7 million in 2008, the most recent year for which population data are available.

The budget also grew in part because the state’s economy grew. For years, a wealthier populace generated more revenue to meet growing needs and expectations, according to the 58-page report.

Areas of state spending that grew the most were funding for health care services and public education. Appropriations for the Department of Medical Assistance Services’ and direct aid to local school systems through the Department of Education both grew by 20 percent, or slightly more than $3 billion.

Both were driven by rising demand. The caseload of Virginians eligible for Medicaid, the federal-state program that pays for health care for the poor, elderly, disabled and low-income families with children, increased by slightly more than one-third.

Public school enrollment from kindergarten through high school rose by 8 percent, and the number of state-supported personnel positions grew by 18 percent. Enrollment at state-supported colleges and universities climbed by nearly one-fifth.

The most rapid growth came in what’s known within state government as non-general funds, which involves spending required under state law and federal mandates, making it the hard for legislators to control. Non-general funds flow from dozens of sources such as fuel taxes, college tuition, federal funds and court fines and fees and are routed directly to predetermined programs such as road construction, debt service, child-support services and Medicaid.

By contrast, the money in the state’s general fund comes from income, sales and corporate and other general taxes and is appropriated by the legislature in specific amounts to core purposes, including law enforcement and public schools.

While the general fund budget grew from $11 billion in fiscal 2000 to $16.2 billion in 2009, a 46 percent increase, non-general spending more than doubled over the same time, from $10.3 billion to nearly $20.9 billion.

“I think it’s a concern, the extent to which the budget is made up of non-general funds. A lot of those things … tend to be on autopilot,” said Walt Smiley, the commission’s staff project leader for the report.

“A little bit less discretion is exercised, many of those funds are not reviewed on an annual basis with the same degree of scrutiny that general funds are,” Smiley said.

The report and weak monthly revenue collections are likely to drive a harder look at non-general revenue sources starting in January.

Since the current budget took effect, Gov. Timothy M. Kaine and the General Assembly have had to absorb about $5.6 billion in revenue shortfalls.

Lawmakers have little choice but cut given a projected shortfall of at least $1 billion before they even begin debating a new two-year budget in January and a clear promise by Republican Gov.-elect Bob McDonnell to veto any tax increases.