By Kathryn Watson | Watchdog.org Virginia Bureau
ALEXANDRIA — Allowing state agencies to submit their own spending cut suggestions as Gov. Bob McDonnell has without first laying out specific ground rules is bad budget practice, according to one state fiscal policy expert.
McDonnell last month asked the state’s agencies — excluding the agencies handling K-12 education and Medicaid — to come up with proposals for slashing 4 percent of their budgets in fiscal year 2014, in case Congress isn’t able to resolve the so-called “fiscal cliff.”
Last week, the Virginia Department of Planning and Budget released agencies’ suggested cuts in a 21-page document.
By failing to list specific requirements for prioritizing programs, McDonnell gave agencies too much room to make poor suggestions, said Bob Williams, president of the nonprofit State Budget Solutions.
“The 4 percent (strategy) leaves it up to the agencies to kind of game the system,” Williams said. “I hate to say it that way, but that’s what happens.”
How do agencies game the system? They make the cuts so dastardly that no politically savvy politician would go for them, Williams said.
“The problem when the agencies do it is normally, they’ll propose the essential programs as the cuts,” he said. “You know, closing the prison, closing the mental health hospital, because they know the Legislature won’t do that. And they won’t propose the lowest-priority programs.”
Martin Kent, McDonnell’s chief of staff, did mention some guidelines to executive agency heads in the Nov. 8 memo requesting the cuts.
“We understand that the ongoing hiring freeze has placed additional responsibilities on state employees,” Kent wrote in the memo obtained by Watchdog.org. “Therefore, as has been asked annually as part of your ongoing efficiency reviews, these savings plans should focus on identifying the lowest priority activities in your respective agency, rather than on personnel.”
Kent also emphasized the need for “recurring savings rather than one-time savings.”
But, McDonnell’s office didn’t specify whether hiking fees could be used to bridge the fiscal gap.
“He was more or less silent on the issue of fees,” Dan Timberlake, director of Virginia’s Department of Planning and Budget, told Watchdog.org. “That was up to the agencies.”
So, the Department of Health took advantage of that silence, suggesting a 50-cent increase to the annual vehicle registration. That would bring in $3.4 million. In Virginia, a portion of vehicle registration fees are used to fund health services.
The department also wants to increase by $20 the restaurant permit fee, bringing in another $450,000.
McDonnell has the authority, if he believes agencies’ cuts are misplaced, to alter the budgets or take other action.
“To the extent an agency submits a savings strategy that does not meet these criteria, the governor may reduce that agency’s base appropriation after consultation with the Department of Planning and Budget,” Martin’s email to executive agency heads reads.
McDonnell did leave some departments untouched in his budget-trimming request. He left the legislative and judicial branches alone, as well as K-12 education and Medicaid, mostly for legal reasons, said Timberlake.
McDonnell spokesman Jeff Caldwell said any cuts are only “potential” at this point.
“Every item is important to someone or some community,” Caldwell said in an emailed statement. “Nothing has been determined at this time, and no decisions made. These are simply state agencies best recommendations for how their budgets could be reduced by 4 percent in the future should such reductions be financially advisable.”
Williams said state government should be able to find cost savings without having to cut core functions.
“I mean, there’s got to be at least 10 percent waste in all of government, over all the years of excess growth and all the federal funds coming in, so you really need to pare back,” Williams said.
A not-yet-officially released report by the Joint Legislative Audit and Review Commission, the investigative arm of the General Assembly, shows overall spending in Virginia has soared 18 percent, adjusting for both population growth and inflation, from 2003 to 2012. Spending has even increased in 2011 and 2012, partly because of the influx of federal stimulus dollars.
The draft report is posted to the commission’s website but has not been released publicly.
Williams said the governor needs to list the five to 10 most important core functions of government and tell each agency to return with its entire budget categorized in three levels of priorities — high, medium and low. Then, each agency must specify how those programs meet the core functions of government, as outlined by the governor, Williams said.
“And whatever programs don’t meet the core functions of government should drop out,” said Williams. “So, in some cases, some agencies may take a 10 percent cut, and some agencies may be doing a good job, and need more money.”
McDonnell will make his suggested amendments to the biennial budget in his annual speech to the money committees on Dec. 17, said Caldwell.
Contact Kathryn Watson at (571) 385-0773, or [email protected]
— Edited by Kelly Carson, [email protected]