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If Not VP Then JP; Our T-Bob’s Got a Future

Our Governor has built quite a resume. Aiming initially at a Bain type profile, he has developed an innovative finance background along the way. Balancing budgets by cooking the books, dabbling in high stakes derivatives with the state retirement system, now bringing a whole new opaqueness to accounting.

"Here's the simple truth: our state retirement system is underfunded, and this situation threatens the system's long term solvency."- Governor McDonnell in his 2013/14 budget remarks

Riddle this: Is the Virginia Retirement System (VRS) any healthier today than it was when Bob McDonnell became governor? This may be the most difficult riddle of the Virginia fiscal landscape. Here is a good faith effort to help everyone understand how Bob McDonnell claimed this year's budget recommendation doubled contributions from FY2011/2012.

On the face of it, McDonnell's recommended contribution of $2.21 billion (per year) in total funding to the systems for state employees and teachers does not look like double the $1.55 billion reported contributions in 2011 . It is clearly not double the $2.1 billion contributed in both 2008 and 2009, before he took the helm. But, bear with me.  By lowering the contributions for the year ended 30 June, 2011 from that of his predecessor by half a billion and by assuming the VRS reflected the $620 million IOU as part of the 2011 reported contribution amount, the cash contributions for 2011 are really $0.9 billion. Voila! He has "doubled" the fiscally irresponsible contribution his administration ponied up to VRS in 2011.

"The bottom line is that it's not going to affect the long-term health of the [VRS] fund because it's being paid back with interest." - Governor McDonnell discussing the $620 million funding shortfall on WNIS in September 2011

McDonnell Business Tax Increase Spurs Employment

An increased direct tax on wages paid by Virginia employers resulting from the McDonnell Administration's failure to repay loans that kept the state unemployment insurance benefit programs solvent hasn't hurt jobs. But it does raise questions about how many other obligations have been ignored to "balance" the budget.

First he raided the Virginia Retirement System. Then he tried to sell off the ABC stores, the only reliable source of revenue for transportation funding. He pretended to find unaccounted for funds in the Department of Transportation, used them as a bridge to fund maintenance then quietly refunded the reserves. Now we find out that Federal Unemployment Trust Fund loans have gone unpaid. What other shell games are being conducted? Is Bob a flimflam man?

So ironic that this is an unemployment tax; Virginia is now a "credit reduction" state; meaning businesses essentially pay the late fees for the state's loans. Normally, employers pay a rate of 6.0% on the first $7,000 in wages and receive a credit of 5.4% of that on their federal taxes. That is a net tax of 0.6%. Employers in states that fail to meet their obligations on loans to fund unemployment payments face a reduction in the tax credit. In Virginia's case, that reduction is 0.3%, raising the net tax to 0.9%, an increase of 50%. If taxes are such job killers, a Republican tenet, and Bob has in effect raised taxes on businesses, it begs the question: just who or what is responsible for the improved Virginia unemployment rate?

It also begs the questions: 1) How will this play in the Forbes "Best States for Business" rankings and; 2) Is there a single Virginia elected or official of the Democratic Party of Virginia who is watching the henhouse or even knows where to look?

Paul Goldman: “Did McDonnell’s office just dare Democrats to put ABC...

Another interesting column by Paul Goldman on Bob McDonnell's ill-conceived, half-baked ABC privatization plan.
The challenge comes from his top spokesman as reported by Washington Post reporter and blogger Anita Kumar in her latest posting.

In the rules of politics, McDonnell spokesman Tucker Martin, a friend and a good guy, just dared Democrats to put an ABC referendum on the ballot.

Here's why.

Delegate  Joe Morrissey, the House Democratic whip, came out yesterday against the Governor's plan, for many of the reasons any number of other groups/delegate/senators have also indicated having serious reservations about the proposal.

In addition, the beer and wine wholesalers, big supporters of candidate McDonnell last year, also came out against the plan as being fiscally flawed and favoring the big guys over the little guys, a point made by many small business owners.

Given that such opposition was surely expected by McDonnell and his staff, one would expect the normal response, this is part of the ritual dance here.


More after the "fold"

Sen. McEachin Statement on McDonnell ABC Privatization Plan

Here's Senator Donald McEachin's statement on the ABC privatization plan released today by Bob McDonnell. Enjoy - or more likely, not!
I appreciate the governor releasing his plan so that we will have the time and opportunity to study it. I have, however, some questions that I very much believe need to be addressed. The governor has said repeatedly that we cannot raise taxes, that tax increases are a job and economy killer. So, I would ask him, how and why, in these extremely perilous economic times, he would consider raising taxes on small business, the engine of job creation here in the Commonwealth and in the country. I would ask him to address how and why he would consider raising taxes on the backs of those mom and pop businesses that create 80% of the jobs which are so desperately needed in this economy.

Moreover, I am troubled by the idea of issuing 1,000 licenses. As we can well surmise, this number of licenses means there will be an inordinate number of stores selling hard liquor. These stores could end up across the street from a local high school, or next door to the ball fields or in other places where our underage youth will find uncommon temptation. I also fear that too many of these new stores will end up in low income neighborhoods, taking advantage of those who already struggle, those who are most vulnerable and those who can't make ends meet. Those are the very individuals, suffering without jobs and without a secure future, who will find themselves turning to alcohol which could now be all too available on every block in their community.

I would hope these questions can be addressed as we move forward and as we all continue to study the governor's proposal.

Paul Goldman: Put McDonnell’s ABC Privatization Plan to a Referendum

Thanks to Paul Goldman for the following guest column. I agree with him; let's put the idea of privatizing ABC stores to the voters. {UPDATE: Paul suggests a subtitle for this article -- "How Dems Win in 2013."}

If you would like to see a Democrat get back in the Governor's Mansion in 2013, read further. If not, then read further but keep your blood pressure pills -- better yet a 911 medical alert button -- handy.

Truth is, the ABC's of getting back the Governor's Mansion in 2013 were laid out for Democrats by Delegate Bob McDonnell in 1996 as part of House Joint Resolution 170. Some 14 years later, Governor Bob McDonnell has spent all of 2010 trying his best, in the name of the state's ABC system, reminding Democrats about what he said in 1996. But being good Virginia gentlemen, House Democratic Minority Leader Ward Armstrong and Senate Democratic Majority Leader Dick Saslaw have been politely refusing, their members going along in that Virginia way.

How quaint. Yet like the energizer bunny, His Excellency refuses to allow Democrats to snatch defeat from the jaws of victory.

lots more after the "flip"

Paul Goldman: ABC Privatization Will Create Oligopoly, Lose Revenues


In this debate, Paul Goldman makes a few key points on ABC privatization that absolutely blow the idea out of the water: 1) it won't raise nearly as much revenue as the $250 million Virginia gets now; 2) this won't help transportation, as Bob McDonnell claims; 3) this will create "an oligopoly in the wholesale business" - very valuable licenses for some very politically connected people" - and actually hurt the free market for alcoholic beverages in Virginia. In response, Norm Leahy basically says we don't know the details of Bob McDonnell's proposal yet, so we don't know if Paul Goldman's claims are correct. Well, mayyyyyybe, but that raises an important question: after debating McDonnell's proposal for about a year now, why don't we know the details yet? What's Bob McDonnell hiding exactly? Very curious.

McDonnell Wants You to “Drink Baby, Drink”

Republicans have lousy math skills. Though Malek has a counting resume, it isn't accounting. So here's help: to equal the revenue from the ABC stores, every year the state must sell 50,000 liquor licenses or have you and yours purchase 15.5 bottles of booze apiece. No government overhead factored.

This is a nice economics lesson, too, because it tells you a lot about monopolies. Virginians aren't very familiar with private sales of bottled spirits. A retail liquor license in New York City costs about $4,000. The privatization proponents have no real analysis, but there are estimates of some 800 stores going into the business. Using the high New York figure, that brings in a grand total of $3.2 million. No overhead factored. That means the consumers must bear the remaining $196.8 million. Again, using those contemptible New York figures, with a per gallon liquor tax of $6.44, every swinging Virginian must purchase 3.82 gallons of spirits per year. With the combination of expensive licenses and high taxes, we're down to 15.3 quart bottles of hard booze per Virginian per year.