Standards and Poor Global issued a mild rebuke to the state of Virginia’s finances, as the commonwealth continues to tap into its “rainy day fund” in good times in order to balance the state budget. From the Richmond Times- Dispatch:
“The negative outlook reflects the commonwealth’s recent trend of structural imbalance and projected lower reserve balances,” Spain wrote. “The planned use of the revenue stabilization fund is out of step with the current economic cycle and a reversal of its past practices of building reserves during periods of economic growth.”
“In our opinion, lower reserves could weaken its ability to respond to economic and financial downturns and be an indication of weaker credit quality,” she added. “Management’s ability to adjust to changes in the commonwealth’s economy, whether through revisions to forecasts or sustainable budget adjustments, will be critical to maintenance of the rating.”
McAuliffe and assembly budget leaders agreed this year to establish a new cash reserve fund with at least $35 million expected to be collected through a new tax amnesty program the state launched recently. The budget predicts as much as $90 million in additional revenues from the amnesty collection of past due taxes, while requiring any excess funds to be deposited in the new reserve.
It’s a band aid, to be sure — hence the reason why Virginia Republicans continue to hammer home the idea that Medicaid expansion under its current form would be fiscally reckless under the current tax schematic.
This is despite contentions from the McAuliffe administration that adoption of Medicaid expansion would add $138mil to the state coffers… at least, in the short term.
