State Budget Practice Report Cards and Budget Resource Guide

Virginia scored straight As in budget forecasting and reserve funds for fiscal 2016 through 2018. While the marks were fitting for a state with triple-A general obligation credit ratings, its performance in the three other categories showed how even a state with impeccable credit has room to improve its budgetary process.

Take legacy costs, in which Virginia averaged a D. It fell short of meeting actuarial recommendations for funding other postemployment benefits, chiefly health care, for all three years studied. The state also failed to match actuarial recommendations for funding pensions in fiscal 2016 and 2017. It succeeded in making the recommended contribution in 2018, however, which lifted its mark that year to a C.

Virginia averaged a C in transparency. Like forty-five other states, it failed to disclose deferred infrastructure replacement costs in 2018. It also neglected to produce regular tax expenditure reports. A measure requiring the Department of Taxation to report the fiscal, economic, and policy impact of sales and use tax exemptions was repealed in 2012. Although the legislature’s Joint Subcommittee to Evaluate Tax Preferences publishes updates on the topic on its website, disclosures are neither consistent nor complete.

Virginia earned an A average in reserve funds by having policies in place that govern fund disbursement and replenishment and that link rainy day fund deposits to revenue volatility.

The state’s top grade in forecasting stemmed from its consensus revenue estimates. They are prepared by the Joint Advisory Board of Economists and Governor’s Advisory Council on Revenue Estimates, both of which are composed of gubernatorial and legislative members and outside experts. Economic outlooks from two consulting firms are adapted to reflect the state’s economy using revenue data from the Virginia Department of Taxation, including the historical trend of general fund collections and applicable tax law changes. Meanwhile, the Department of Planning and Budget produces six-year revenue and expenditure forecasts.

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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