High costs

Okay, so our name is VA Cost Cutting, and yes, normally we talk about cost-savings measures (or at least measures to increase transparency and accountability). But today, we want to mix things up a bit, and talk about some things that cost Commonwealth (and Virginia taxpayers) lots of money.

Namely, what is the cost of high school dropouts?

Educational attainment has become a hot topic for many reasons, but one thing that is often overlooked is the fiscal impact of students not completing high school.

The researchers at the Friedman Foundation have looked into this impact in several states. And, to be true to our cost-cutting theme, they also look at how much state's could save by implementing school choice and increasing their graduation rates!

• The High Cost of Maryland’s Dropout Rate

We examine how Maryland’s decreasing graduation rates are materially affecting the state’s finances through reduced tax revenues, increased Medicaid costs and higher incarceration rates. This study examines how increased competition from private schools could raise public school graduation rates and save Maryland taxpayers millions of dollars each year.

• The High Cost of Low Graduation Rates in North Carolina

It finds that each dropout costs the state $4,437 per year in lost tax revenue and increased Medicaid and incarceration costs, every year for the rest of his or her life. Each year’s class of dropouts costs the state $169 million every year. A modest school choice program, increasing private school enrollment by 4 percentage points, would improve public school graduation rates, reducing dropouts by up to 5,483 students per year, saving North Carolinians up to $24 million in tax revenue, Medicaid costs and incarceration costs every year.

• The High Cost of South Carolina's Low Graduation Rate

It finds that each dropout costs the state $3,228 per year in lost tax revenue and increased Medicaid and incarceration costs, every year for the rest of his or her life. Each year’s class of dropouts costs the state $98 million every year. A modest school choice program, increasing private school enrollment by 6 percentage points, would improve public school graduation rates, reducing dropouts by up to 1,549 to 3,137 students per year, saving South Carolinians between $5 million and $10 million in tax revenue, Medicaid costs and incarceration costs every year.

Cost Cutting Virginia's Budget

We've already mentioned some of the 2009 bills up in the General Assembly aimed at saving the Commonwealth money or increasing transparency and accountability in state government operations. Now, how about a look at the budget?

To view proposed amendments to the budget on the House side, click here.

To see Senate budget requests, click here.

(For information on the Governor's recommendations, click here.)


We'd love to hear your thoughts on any of the proposed amendments, or let us know how you'd cut the budget!

Updated: Some more 2009 bills

HB 1674 Workers' Compensation; pharmacist filling a prescription to dispense therapeutically equivalent (Delegate Harry Purkey)

This legislation should reduce the cost of prescriptions paid by the State Employees Workers’ Compensation Services. (Fiscal Impact statement)

SB 893 Submission of executive budget; personnel costs for state agencies. (Senator Ryan McDougle)

Requires the total amount appropriated for personnel costs for each agency to be included in the Budget Bill for each agency. The bill also provides that the amount appropriated to each agency for personnel costs shall only be used for personnel costs and that any appropriation set aside for personnel costs that remains undistributed at the end of any fiscal year shall revert to the general fund of the state treasury.

SB 1542 Alcoholic beverage control; privatization of ABC stores. (Senator Mark Obenshain)

Provides for the auction of "package store" licenses to authorize the retail sale of alcoholic beverages for off-premises consumption. The bill also requires the ABC Board to sell or transfer all interest in real property utilized in the wholesale and retail sale of alcoholic beverages. The bill requires the ABC Board to set a fixed number of licenses for all localities, which shall be at a minimum one license for each locality of the Commonwealth and shall not exceed one license per 10,000 residents of the locality. The initial issuance of license by the Board would be through regional auctions beginning July 1, 2010, which may also be conducted through the Department's publicly accessible website. The annual state license tax on package store licenses would be the initial purchase price at auction plus an annual inflation adjustment based on the Consumer Price Index. The tax levied on spirits sold in package stores would be 25 percent of the price charged.

HB 2356 Budget Bill; requires 2010-12 biennium and future bills to be prepared using zero-based principles. (Delegate Todd Gilbert)

Requires the Budget Bill for the 2010-12 biennium and future Budget Bills to be prepared and formulated utilizing zero-based budgeting principles.

HB 2037 Debt Collection Recovery Fund (Delegate Sal Iaquinto)

Establishes the Debt Collection Recovery Fund. The bill also provides that the Division of Debt Collection shall (i) deposit to the Fund all revenues generated by it, less any cost of recovery, from receivables collected on behalf of state agencies and (ii) transfer the remaining funds to the appropriate state agencies on a periodic basis. In addition, the bill provides that final orders of final agency case decisions may be recorded, enforced, and satisfied as orders or decrees of a circuit court upon certification of such orders by the agency head or his designee. Furthermore, each state agency and institution may charge attorney's fees and collection fees on all past due accounts
receivable.

HJ 724 Constitutional amendment; limits appropriations in fiscal year to preceding year's (Delegate Todd Gilbert)

Limits total appropriations in any fiscal year to the preceding year's total appropriations plus a percentage increase equal to the past two years' average increase in the rate of inflation plus the average percentage increase in population. The amendment provides that any revenues collected in excess of the limitation shall be distributed: 75 percent to be refunded to individual income taxpayers and 25 percent to the Revenue Stabilization Trust Fund. "Total appropriations" is defined to exclude moneys appropriated that are received from the federal government or an agency or unit thereof. If the amount in excess of the limitation is less than or equal to one percent of the limitation, the total excess shall be deposited to the Revenue Stabilization Fund if that Fund has not reached its constitutional limit, or if that Fund has reached its limit, the excess shall be appropriated to the general fund.

In Case You Missed It: Virginia Needs to Ditch Unwieldy Two-Year Budget Process

One thing we are definitely in favor here at the Cost Cutting Caucus is accountability. And we know that one key to accountability is transparency.

Delegates Albert Pollard and Chris Saxman have introduced legislation (HB2092) that would help bring more accountability to Virginia's budget process by shifting to an annual budget cycle, as opposed to the current 2-year budget cycle.

We mentioned their bill here the other week- and the two delegates shared also their views on this proposal in this editorial that ran in the Richmond Times Dispatch.

The write:

As members of opposite parties in the House of Delegates, we realize that revenue shortfalls know no partisan bounds.

While no one could predict Wall Street's meltdown, we believe that a concrete step to bring greater budget discipline to Virginia is the enactment of annual budgets. For that reason, we are co-sponsoring legislation to change Virginia's traditional two-year budget to a one-year document.

...

The argument for an annual budget can be summed up in two words: accountability and discipline.

The two-year budget creates a muddy picture of the state's true finances. For instance, when a headline screams about a billion-dollar shortfall, is it a billion dollar annual shortfall, or is that spread over two years? When a leader talks about a $500 million cut, is it an annual cut or a biennial?

Read their full Op/Ed piece online here.

It it worth repeating, school choice SAVES money

With this year's budget challenges before the General Assembly, we think it is worth re-iterating yesterday's post about school choice SAVING money.

Yesterday we wrote about the study by the Florida Office of Program Policy Analysis and Government Accountability (OPPAGA) found that "taxpayers saved $1.49 in state education funding for every dollar loss in corporate income tax revenue due to credits for scholarship contributions."

Okay, so you're asking, but what does this mean for Virginia, right?

Well, thankfully for us, the folks at the Thomas Jefferson Institute for Public Policy have already crunched the numbers for us.

No issue is more challenging for the Virginia General Assembly this year than the budget. But while opponents of parental choice argue that a tax credit for corporations offering scholarships for children to attend the public or private school of their choice would drain the state treasury, nothing could be further than the truth. This fiscal analysis -- using the latest Department of Education statistics -- demonstrates how wrong that assertion is. In fact, such a tuition tax credit would have a positive fiscal impact.

Positive fiscal impact?? That sounds like a pretty good thing to us!

Still not convinced? Check out the full report and analysis online.

Still don't believe us that school choice saves money??

We have said it again and again and again, school choice saves money- something our friends over at School Choice Virginia will agree with.

Florida, a state that has been a national leader for educational reforms and greater parental school choice, has recently taken a look at the fiscal impact of their corporate tax credit scholarship program.

A study, conducted by the Florida Office of Program Policy Analysis and Government Accountability (OPPAGA), released in December 2008, concludes that "The Corporate Income Tax Credit Scholarship Program Saves State Dollars."

The OPPAGA "is a special staff unit of the Legislature created by state law under the oversight of the Joint Legislative Auditing Committee. OPPAGA examines agencies and programs to improve services and cut costs when directed by state law, the presiding officers, or the Joint Legislative Auditing Committee."

From the report summary:

• The corporate income tax credit scholarship program produces a net savings to the state. We estimate that in Fiscal Year 2007-08, taxpayers saved $1.49 in state education funding for every dollar loss in corporate income tax revenue due to credits for scholarship contributions. Expanding the cap on tax credits would produce additional savings if there is sufficient demand for the scholarships. The Legislature may wish to consider expanding the program when the level of tax credits awarded approaches the cap and there is a sufficient waiting list of students who could use the scholarships.
• Including insurance premium tax credits in the scholarship program would broaden its funding base and increase the probability that the tax credit cap is reached. Currently, not all insurance companies in the state have an incentive to participate in the program.

School choice saves money, and helps kids. Sounds like a smart investment to us!

Shortfalls?

From a few months back, this is still worth the read. Leonard Gilroy, Director of Government Performance at Reason Foundation, discusses "Closing the Budget Shortfall," over at Bacon's Rebellion.

Virginia must develop more effective tools to systematically evaluate competition and efficiency opportunities across state government.

One logical place to start is with the Commonwealth Competition Council (CCC). An independent advisory body in state government since 1995, the CCC is a bipartisan council charged with providing long-term strategic direction for privatization and competition initiatives. Over the last dozen years the CCC has done excellent work on privatization, identifying and researching a plethora of opportunities to achieve cost savings, service quality improvements, and higher
customer satisfaction.

Show me the money!!

Movie buffs everywhere will immediately think "Jerry Maguire," but for those of us here at the Cost Cutting Caucus, "show me the money" makes our minds go right to state spending.

It's something we've been hammering on for years (and just as enthusiastically as Tom Cruise and Cuba Gooding, Jr. in their memorable scene). For some thoughts on transparency, see here, here, here, here, and here, just to name a few.

We're definitely all for greater transparency, which helps taxpayers hold government accountable for the tax dollars that they spend. Once again this year, several Virginia lawmakers are pushing for legislation to create more transparency in state spending.

From the NVDaily:

When it comes to taxpayer dollars, government should be completely transparent, according to one local legislator.

Legislation working its way through the General Assembly aims to make sure that happens.

Senate Bill 936, patroned by Sen. Jill Holtzman Vogel, R-Upperville, Sen. Ken Cuccinelli, R-Fairfax, and others would require the state to build a searchable database of all spending in a "format designed to encourage the greatest amount of use by the general public."

Say it with us... "Show me the money!"

The state and retail business

The Wilder Commission recommended it back in 2002.

The folks here at the VA Cost Cutting blog have talked about it over the years as well (see here and here).

And again this year, Senator Mark Obenshain is introducing legislation that calls for it.

What is it, you ask?

We're talking about getting Virginia out of the retail business of selling alcohol, of course.

Now even the folks over at the News Leader in Staunton are voicing their support.

In their editorial they write:

It's time for Virginia to get out of the booze business.

State Sen. Mark Obenschain, R-Harrisonburg, says the state could make more than $1 billion — including about $700 million in new revenue — by privatizing the business now operated through Alcohol Beverage Control.

It's an idea that makes sense. The stores, the overhead, the payroll, the inventory - all of that would go away under a proposal by Obenschain, turning all but the regulatory part of liquor sales over to private companies.

With the penny-pinching we already see going on across the board, this proposal actually brings money in.

2009 Bills

As we noted, the 2009 session is underway. Please continue to share your cost savings suggestions and ideas with the Cost Cutting Caucus!

A few bills worth taking a look at for the 2009 session :

HB 1848 Transportation; Auditor of Public Accounts to administer operational performance audit. (Delegate Lingamfelter)

Provides for the Auditor of Public Accounts to administer an operational and programmatic performance audit focusing on the agencies within the Transportation Secretariat. The audit will be conducted by a private management consulting firm with a final report to be completed by December 31, 2009. The goal of the audit is to determine an objective and independent cost savings assessment of the Commonwealth's organizational structure and efficiency of the Commonwealth's transportation programs to provide information to the Governor and the General Assembly on ways to reduce duplication of effort and implement cost savings measures and programmatic efficiencies in the operation of state transportation programs.

HB 1641 Efficiency in Government Advisory Councils; established. (Delegate Bob Marshall)

Establishes an Efficiency in Government Advisory Council for each secretariat of state government to review the operations of the agencies within the assigned secretariat for the purposes of identifying efficiencies and determining specific operational areas where savings may be realized. Under the bill, all recommendations that result in identifiable monetary savings among agencies within the assigned secretariat shall be presented to the Governor and General Assembly no later than November 30 of each year.

HB 2285 Searchable Database Website of Revenue, Budget Item, & Expenditure; Sec. of Technology; created. (Delegate Cline)

Provides for the Virginia Enterprise Applications Program (VEAP) within the Office of the Secretary of Technology to create and maintain a searchable database website containing information on state revenues, appropriations, and expenditures.

HB 2174 Retention of energy savings by state agencies; established. (Delegate Hogan)

The program is required to identify specific measures that the state agency may implement in order to reduce energy expenditures. The Department shall track
the energy expenditures for each state agency and calculate its energy savings,
which shall be reported to the Department of Planning and Budget, the House Appropriations Committee, and the Senate Finance Committee.

HB 2463 Government Efficiency Review Commission; established. (Delegate O'Bannon)

Establishes the Government Efficiency Review Commission to review agencies on an eight-year cycle and advise the General Assembly on the elimination of waste, duplication, and inefficiency on the part of such agencies.

HB 2092 Budget, State; changes from biennial to covering single fiscal year beginning July 1, 2012. (Delegates Pollard & Saxman)

Changes the Commonwealth's budget from a biennial budget to a budget covering a single fiscal year beginning with the budget for the period July 1, 2012, through June 30, 2013.

HB 1965 Public/Private Education Investment Tax Credit; created for business entities making contributions. (Delegate Saxman)

Please note that this list is not intended to be an endorsement of these measures by the Cost Cutting Caucus at this time.

Let the fun begin! (Let us know your cost-cutting ideas for Virginia)

The 2009 Virginia General Assembly has begun! Legislators get to work in Richmond for the 45-day sprint of a session.

We here at the Cost Cutting Caucus will do our best to keep you in-the-know on everything happening in Richmond, but this year you can watch some of the fun yourself in both the Senate AND the House. (Session generally begins at noon daily)

As things get underway in Richmond, let us know your thoughts about this year's session and your cost-cutting ideas to help cover the budget shortfall.