- The Washington Times - Saturday, November 12, 2011

Despite boasting an unemployment rate well below the 9 percent national rate, Virginia’s economy remains on shaky footing heading into retreats next week by the General Assembly’s money committees.

The retreats, during which legislators will receive updates on the state’s financial outlook, are scheduled ahead of Gov. Bob McDonnell’s presenting his budget next month.

Among the top concerns, officials say, is the state’s reliance on the federal government as a driver of its economy — which could become exposed should a congressional supercommittee tasked with finding $1.2 trillion in cuts by Nov. 23 fail to reach a deal. That would trigger $1.2 trillion in automatic cuts, half of which would come from defense spending.

“We’re all a little hostage to what the federal government is going to do with this thing,” Virginia Secretary of Finance Richard D. Brown said. “We have a huge procurement apparatus, whether it’s technology, whether it’s defense. Those are usually higher-paying jobs — they’re lawyers, they’re business manager, they’re accountants.”

And while October revenue collections increased by 3.1 percent over last year — the 19th month out of the last 20 that collections were higher than the previous year’s — Mr. McDonnell, as he has in the past, urged caution, noting that the state economy’s growth rate has slowed in recent months.

Mr. McDonnell, in announcing the state’s $545 million fund balance in August, said he was setting aside $30 million for a contingency fund that could be used, for example, to bridge the gap of lost revenue coming from defense or procurement cuts on private companies that pay state taxes.

But sluggish growth, uncertainty regarding federal funding, and concerns about the national economy are cause for caution.

“Current national economic indicators suggest the modest expansion should continue, although the recovery remains vulnerable to any shock,” Mr. Brown wrote in his monthly revenue memo to Mr. McDonnell, a Republican. “In Virginia, job growth has slowed significantly from its modest paces earlier in the year.”

Payroll employment increased 0.2 percent in September from September 2010. In Northern Virginia, growth was flat, Hampton Roads fell 0.7 percent, and the Richmond-Petersburg area fell 1.3 percent.
And according to the Commonwealth Institute for Fiscal Analysis, a liberal-leaning Richmond-based think tank, Virginia now faces challenges greater than after prior recessions.

Unemployment increased 14 percent in Virginia in 2010 — the largest jump in the South Atlantic Region — to its highest level since the recession of the early 1980s, according to a recent report from the institute.

“Taking stock of this first year of the recovery shows that workers in Virginia are really only just now facing the headwinds of a deep and devastating recession,” institute President and CEO Michael Cassidy said. “The policies we put in place at the state level need to take into account the extended jobless recovery, the growing needs of Virginians, the disparate impacts among groups of Virginians, and the fact that we are going to be in this situation for a very long time.”

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2021 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide