Local Commentary

Delegate Hull’s Richmond Report

hullmugState legislators were pleased when Congress passed the federal stimulus bill this past winter.

Slow Stimulation

State legislators were pleased when Congress passed the federal stimulus bill this past winter.

With a total value of $787 billion, the American Recovery and Reinvestment Act was signed into law by President Obama on February 17.

The bill was a package of federal tax cuts, an expansion of unemployment benefits, and spending over a two year period.

Most of the spending was for education and health care with lesser amounts for energy and infrastructure.

What helped state budgets was the $144 billion to states to prevent reductions in health and education programs.

In Virginia, we received over $1 billion right away, which prevented us from having to make an additional $800 million budget cut.

The shortfall was due to reduced revenue collections and the governor said that he would have had to cut 7,200 state employees without the stimulus funds.

Anti-Depressant

But, I was disappointed that there was not more for infrastructure spending, which was where the majority of the funding was initially to go.

Instead, only $80.9 billion went for investments in our infrastructure, with only $51.2 billion going to build roads, bridges, rail, and sewers.

What started out as a stimulus bill ended up largely preventing layoffs at the state and local levels.

Now, that is good. But, the effect will only last for two years. That funding will stop at the state level after 2010 until revenues pick up.

But, tax revenue depends on jobs. After all, if people are not working, then they have no income or spending to tax.

Lagging Indicator

Unfortunately, job creation lags behind business growth and tax revenues lag behind new jobs.

For every $1,000 in wages, the Virginia treasury receives an average of between $40 and $45 in income tax revenue.

That same amount of income also produces about $14 in sales tax revenue coming to the state treasury.

Nothing produces jobs like spending for roads, bridges, dams, and other public works because contractors bid on that work.

They, in turn, take on new employees and then hire subcontractors and purchase goods like concrete, lumber, and asphalt.

Each step of the way, people are hired and they, in turn, spend their money. That yields new jobs at grocery stores, dry cleaners, and other places.

That kind of spending is good for both family incomes and state revenues, which provide the services we all need.

More Cuts

Because our tax revenues continue to drop, Governor Kaine has proposed new budget cuts totaling $1.35 billion for 2010.

This is on top of about $6 billion that has already been cut over the past two years. But, 2011 looks even worse.

That is because most of the cuts, $898.3 million, are attained through the use of one-time actions which have to be reconciled in 2011.

It does looks like our national economic decline may have bottomed out and started to slowly grow.

But, neither families nor state coffers will benefit until that growth creates jobs.

Best Again

Continuing a string of accolades that started during the Warner administration, Virginia has again been honored for its positive business atmosphere.

For the fourth year in a row, forbes.com, the Forbes magazine website, has named Virginia the best state in which to do business.

This ranking is based on business costs, labor supply, regulatory environment, economic climate, and growth prospects.

They also measure a state’s quality of life, and Virginia was cited as having the best in the nation.

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