Jody's Op-Ed: Use prudence to stimulate state's economy (Virginian Pilot)

By JODY WAGNER

AS THE WORLD focused on the fiscal crisis on Wall Street, Virginians recently learned that the commonwealth had not escaped the ripple effect of the national crisis. Virginia is facing a budget shortfall that could reach $3 billion over the next two years, according to official estimates.

As the former secretary of finance for the Kaine administration, I know the challenges of budget forecasting. We invest a lot of time working with elected officials of both parties, economists and business leaders, sorting through data to try to accurately predict the state’s revenues, so the governor can put together a realistic budget.

It’s not easy to forecast the future. But no one — Democrat or Republican, economist or business leader — foresaw a $3 billion shortfall.

Virginia generally has a strong economy. While other states have struggled for the past few years with the economic downturn, Virginia continued to weather the storm, thanks to strong fiscal management.

But even Virginia is not immune to the kinds of shifts we’ve seen in our national economy over the past several months. Despite the fiscally responsible approach of the Warner and Kaine administrations, the failed economic policies of the Bush administration are finally taking their toll on our national and state economies.

The continuing aftershocks from the national housing market crash, the slowing of national job growth, the rising cost of fuel and other commodities and the unexpected instability of our national financial markets have affected Virginia’s sales, recordation and income tax receipts. These unforeseen events have slowed our state’s economy more drastically than previously forecast.

A year ago, who would have guessed that financial giants like Lehman Brothers would go under? That one of our major banks, Wachovia, would be forced to sell its banking operations? Or that gas prices would hit $5 a gallon in parts of Virginia? Or that middleclass families would struggle to keep up with the cost of living on basic items, like food?

Now that we know the downturn is going to be deeper and last longer than we expected, we must address the shortfall in a fiscally responsible way. Just as families and businesses have to tighten their belts when times are tough, Virginia government will now have to look for ways to further cut costs. That will not be an easy task.

When Gov. Mark Warner took office, he inherited a $6 billion shortfall. He immediately looked for places to cut the fat from the state budget. At that time, as state treasurer, I cut my agency’s general fund budget about 23 percent.

During my last year as secretary of finance in the Kaine administration, I helped find cuts of nearly $2 billion more, making state government operate more efficiently.

But now, more cuts are necessary to bring our budget into balance. The challenge, of course, will be to find ways to tighten the belt without compromising essential services like education or public safety. Kaine was wise, for example, to postpone major cuts in K-12 education to next year, so it wouldn’t impact students in the middle of their school year.

Besides making tough decisions and looking for places to cut, we also have to look for ways to stimulate Virginia’s economy. For example, earlier this year, I worked with Kaine and the General Assembly on a plan that created jobs by jump-starting construction projects at colleges and universities across the commonwealth. We emphasized projects to help our higher educational institutions address work force shortages.

To continue to grow Virginia’s economy, we need to keep taxes low and our quality of life high to attract more businesses. As a small business owner, I’m proud of our record that’s resulted in Virginia being named the best state for business.

We’re also going to have to take steps to grow sectors of our economy with the most potential to expand. By focusing on the creation of “green sector” jobs, for example, we can put more Virginians to work and help develop energy sources that will make us less dependent on foreign oil.

Jody Wagner, of Virginia Beach, was secretary of finance under Gov. Kaine and state treasurer under Gov. Warner. She is now running for lieutenant governor.

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