The Virginian-Pilot
©
RICHMOND
Among the “issues” Gov. Bob McDonnell has with the House and Senate budget bills are the differing approaches on economic development.
The governor’s concerns are highlighted in a 13-point list obtained by The Virginian-Pilot. The list doesn’t mention either chamber’s proposal to cut hundreds of millions to public education or health and human services programs.
Neither topic was a central part of a discussion McDonnell had with budget negotiators Monday during a breakfast meeting in the governor’s mansion, several sources said.
Nor does the list, which was presented to legislators who attended the meeting, address the roughly $150 million in annual fees built into the Senate budget. The House budget does not include fees.
Instead, it focuses on the revenue projections each budget is based on, how the two chambers treat McDonnell’s request for money to jump start his job creation package and other spending proposals.
Revenue projection disparities are a key area of disagreement between the Senate and the House.
The Senate budget assumes about $247 million more in revenues over the biennium than the House, said Robert Vaughn, staff director for the House Appropriations Committee.
On Monday, Sen. William Wampler, R-Bristol, said the two sides will have made significant progress if an accord is reached by week’s end about how much money the state can spend over the next two years.
Legislators hope to reconcile their spending plans over the next 10 days to craft a budget that overcomes Virginia’s $4.2 billion shortfall.
McDonnell administration officials called the meeting a “positive discussion,” without disclosing details about the session or the document.
Other budget contrasts are found in the money programmed for economic development McDonnell asked for, including an incentive fund to recruit companies.
The Republican-controlled House provides about $48 million of the $50 million McDonnell wanted. The Democratic Senate offers millions less and earmarks some of that money, according to the list.
Another point on McDonnell’s list is the treatment each budget gives to state funding for the purchase of buffer parcels around Oceana Naval Air Station. The Senate budget cuts $7.5 million in funding each year, while the House plan axes funds in the second year.
Also enumerated are plans for the use of federal Medicaid dollars for states, which is under consideration in Congress.
The House has proposed a complex plan to use some of that money to free up other state dollars, along with about $100 million in tobacco master settlement money, to cover expenses.
That idea has drawn the ire of the Virginia Hospital and Healthcare Association.
“We are very distressed about the use of potential federal Medicaid dollars that have not even been approved … for non-health-care purposes,” association vice president Katharine Webb said Tuesday.
Roanoke Times writer Michael Sluss contributed to this article.
Julian Walker, (804) 697-1564, julian.walker@pilotonline.com
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the only companies
The only companies McD will attract are gun shops.
That's why we elected him.
That's why we elected him. We need some more gun shops and more gun shows to the area. Preferably ones with plenty of 9MM ammo. It's getting hard to find. We also want him to attact companies to the area for off shore drilling for oil and natural gas.
McDonnell lacks the guts for across the board cuts.
Frugal, my Aunt Minnie. His plan is nothing but a ideological holy crusade.
Window dressing
Real and effective economic development is about the quality of a region for a company willing to relocate and for an existing business to expand. Frankly, a few million more here or there for incentives may be touted as economic developlment, but no matter how good the salesman or how large the incentive, the quality firms that a rational citizen would want to come to their community are much more likely to be presuaded by the performance of local schools, the condition of the transportation infrastructure, and the quality and education of the available workforce. Now some states try to buy economic development by paying companies to come, but rarely is that justified by the actual fiscal impact. So as we see this charade play out in our own Commonwealth, as citizens we should keep in mind what is really important; that is, education, transportation, and the quality of our workforce. All the rest is just window dressing.
chicken or the egg
Once again the same comment of businesses will not come unless we have a cultural basis in place.
You don't build a professional baseball stadium before the team is here. You don't build a museum until there is money in the coffers. The teachers and schools are funded when the coffers have money.
You don't build a light rail system when the buses are not full and don't have round the clock and expanded routes.
You get businesses (AND THE JOBS) unless you make the incentive by lowering or eliminating corporate income taxes. The jobs lead to greater ability to purchase leisure and cultural items.
Anyways, we the consumer pay whatever expenses the companies have in the form of product and service prices.
Disagree
Portworker, you are really a corporate executive, I believe. Corporations benefit from government infrastructure and should have to help pay for it. For example, the education system trains the workforce for the corporation. Also, the port and road and rail network delivers its raw materials for manufacturing and exports its finished products, and vice versa. And there is no evidence that corporations pass on even the majority of their tax costs to consumers, much less only Virginia consumers. Prices are determined by supply and demand in a free market, not costs to produce. While it may be true that a corporation might consider costs in deciding where to locate, it also considers many other things including the quality of the infrastructure that will support the business. Enough of this silly argument that corporations should pay no taxes. Spreading the burden around with a diversified system of taxation is one of the best ways to ensure equity and approximate matching government expenses with taxes.
too bad you didn't get that it is either the chicken or the egg
By that logic, if it costs more to produce a product than the expenses then that company shouldn't adjust the price????
You don't get the cultural items until you have the tax base to pay for them. The employees buy or rent homes and those homes provide the basis for the revenue of the localities. The more employees, the more the vacant or foreclosed homes are occupied and even more are built. So, which is it, the chicken or the egg?
How do you make Tidewater (and Virginia) the most attractive for employers? Do you spend (except that balanced budgets have to be) and HOPE "they" will come or do you make the incentives realistic with the ONLY item localities can offer - taxes?
By the way, prices are a product of expenses, and WE do pay corporate taxes that is passed on to us in the price.
Pricing logic and corporate taxes
Companies set their prices to make the most profit their customers will pay. Sometimes added expenses are simply eaten because customers will not pay more. Other times, prices are increased simply because demand for the product is higher. That is why a popular car sells with more markup than an unpopular car. Production costs could be identical for each.
Education and infrastructure are not "cultural" items. The are investments that get added to our communities in increments, just like supply and demand in the economy. When demand to locate in Tidewater or Virginia ceases--businesses no longer find the community attrative--you have to ask why. If it is lack of infrastructure, you have to find the means to invest more. In our current economic environment, there are factors like the marketplace beyond Virginia's borders that have dampened expansion plans. We must be ready for the next wave with incentives and infrastructure, but cutting all corporate taxes would be counterproductive in the long term and unfair to other taxpayers.
cost and pricing
Selling price equals cost plus (markup times cost).
Absorption price can be calculated by figuring the number of products made and the costs to make the products. Divide the cost by the number of products and you get another method of determining price.
You can also figure out a price of a service by adding a selling price of parts and supplies to the cost of operating.
The key word that keeps coming up is COST. Cost is either direct or related to the product or indirect or that which is not easily traced to the product.
Supply and demand reflect the elastic or inelastic qualities of price. If the price of the product is less than the cost to manufacture then the company has to decide - keep making the product or stop.
AND - please - keep PROPERTY TAXES since they are local but NOT the income taxes.
More microeconomics
Well, you got it right that when costs exceed price, the company must decide whether to stop making the product. Even then, some will continue to produce for different reasons, e.g., loss leader, sentimental part of business, hope for better times to come, etc. That is how free enterprise works. There are other systems, like government contracts that are cost plus, but most of our economy is not that way.
Property taxes are fine for funding services related to property and some redistribution, but some businesses simply do not need to own property but are highly profitable. Thus they would not pay their share. A stock brokerage that incorporates does not need to own property, but it can be just as profitable as a shopping mall. Why shouldn't the brokerage firm help pay for the business schools that furnish its well-trained emplyees, the regulatory structure that hopefully helps make the firm operate honestly, and the system of higher education that attracts high salaried citizens who buy stocks. That is why we have business taxes that are income based and they need to remain a part of our tax system.