THE GOVERNOR’S “REPORT” TO THE MONEY COMMITTEES

 

Date:  August 26, 2005

Capitol Square is all a buzz with the anticipated Governor’s appearance before the three “money” committees on Monday (Aug. 29).  The 47 delegates and 17 senators are scheduled to assemble at 9:30am to listen to the Governor give a final report on the fortunes of the Commonwealth’s revenue collections and spending for FY 05 (the first full fiscal year of the 04-06 Biennial Budget Period.)

 There have been a minimum of “leaks” from the administration regarding what the Governor will say to the legislators, but you know, I’m very willing to take a wild stab in the dark and see how close I can come to the actual happening.  After praising the cooperative nature of the work done by the Assembly and the Administration and giving a litany of the accomplishments this united effort achieved, he will answer the question everyone is asking, “How much is the actual surplus?” 

 The best information I can obtain is the Governor will indicate the total general fund revenue for the year was $540 million above the January estimate of $13,566,200,000 for FY 05.  Please review my July 7, 2005 Perspective—Mid-Summer Dreams.  While at that point in time I did my calculations on a $600 million “surplus,” I did figure Secretary John Bennett with his conservative  approach to revenue collections could reduce the surplus to about $550 million.  The “informal information” which I have obtained indicates he did just that!

 The Governor will again tell the legislators and the citizens through the massive number of media people who will cover his speech, to be cautious with their future anticipation of revenue collections.  The big budget items producing the surplus were heavier than anticipated individual estimated payments (nonwithholding taxes), corporate income tax collections and those taxes & fees paid on “wills, suits, deeds, and contracts.  In this latter grouping, recordation taxes are by far the largest contributor to the total.  

 As the administration has been stressing for several months and the Governor will reemphasize on Monday, these are the most volatile revenue sources, and their continued extraordinary growth rates are most unlikely.  Therefore, the Governor will say, “BE VERY CAUTIOUS about anticipating future income growth within the General Fund from these uncertain sources.”  The Governor will be most emphatic that the larger sources of revenue for the state—the sales taxes and the individual withholding income taxes—were almost on target both from actual collections and the rate of increase forecasted in January. 

 This report will impact on the deliberations for the Governor’s Budget for 06-08 to be introduced on Dec. 19.  But you can bet his two advisory boards—the Advisory Board of Economists and the Advisory Council on Revenue Estimates—will recommend a very conservative approach.

 This will be a “this is what we expected” type report.  Of course, there will be some legislators who will harshly question the Secretary of Finance on the “poor forecasting” done in January.  But John Bennett will stand up very well under the grilling ‘cause he knows the process so much better than any of his questioners do!

 

THE COMMONWEALTH COMPETITION COUNCIL

 

This is a council established by statute 10 years ago which receives little attention in the legislative halls.  In fact when I mentioned to one of my fellow capitol watchers that I was going to attend their meeting this week his comment was,  “Oh, do they still exist?  I thought they had been disbanded.”

This council does still exist and does some interesting things.  Their mission is to find ways for government agencies to save money.  For instance back in ’98-’99 period they examined the food service activities in the prisons and mental health hospitals.  The recommendations made by the council (composed of private sector appointees, legislators and designated agency heads) were adopted by the Governor and the Assembly with savings in the procedures estimated at $1.4 million. 

They also made a simple suggestion to V-DOT that their trucks be painted white instead of orange.  White is a less expensive paint, as one of the private sector members pointed out to the agency.  Savings of $165,000 were realized the first year.  In addition the resale value of the trucks went from an average of $4,700 dollars to $5,700. 

Now the group is looking at the cost of property and casualty insurance for the state.  Ric Brown of the Dept. of Planning and Budget informed the council the present cost of property insurance coverage for the state is $5.3 million premium per year.  The state has a $1.0 million deductible before private insurance pays.  To reduce this premium the state is looking to join with three to five other non-contiguous states to issue a Request for Proposal (RFP) to secure coverage for those states.  Discussions are also going on to see if there are other alternatives to achieve savings in this area.  This might include a standard insurance policy or a joint self-insurance pool. 

The council also monitors state employment.  An interesting report by the Director of the Dept. of Human Resource Management, Sara Redding Wilson, noted that the total full-time equivalent employment levels in the state have decreased from June 30, 2001 to June 30, 2005 by -2.5--from 117,349 to 114,375.  Part of this is due to “out sourcing some functions of state government.”  Some council members wondered out loud whether this really saves the state any money.  Sara indicated in her area it had not.  She did some outsourcing when she took over the agency and after a year did an analysis.  She determined it had been more costly than if she had done the function with her own employees and brought that particular function back in house.  The council will determine at its October 11 meeting what they will study in 2006.  Outsourcing will in all likelihood be on the agenda. This could be a startling revelation to those who keep preaching privatization!

 

Links to Previous Giesen Perspectives:

Aug. 19, 2005 July 7, 2005 June 8, 2005 May 27, 2005 April 7, 2005 March 10, 2005 February 21, 2005 February 14, 2005 February 8, 2005 January 31, 2005 January 15, 2005 December 23, 2004 November 19, 2004

 

 

© 2007 Eldon James & Associates, Inc.