Gimmicks create phantom surplus

Gov Bob McDonnell is so sure the state will end its budget year at midnight Wednesday with a surplus that he's been handing out party favors for weeks now.

Virginia could use some good news after years of austerity, layoffs and gloom. But the anticipated surplus should be cause for some long-overdue soul-searching, not an excuse to break out the bubbly.

McDonnell expects tax collections to exceed the state forecast by almost $140 million. That doesn't mean state revenues have grown compared with last year. They're actually down. The surplus just means Virginia's finances aren't quite as bad as state lawmakers expected when they revised the budget this winter.

Here comes the real party pooper. State legislators relied on gimmicks to balance this year's spending plan and make Virginia's ledger sheet appear artificially healthy. If those gimmicks were extracted from the budget, the $140 million surplus would be wiped out.

One trick forces large retailers to turn over sales tax receipts early, before some of the money has even been collected. About $228 million that would normally be sent to the Treasury in July arrived last week.

Of course, the state then starts its new fiscal year with a $228 million hole in the budget. Not to worry, state legislators have already agreed to repeat the same maneuver next summer, pushing the problem off until at least 2013.

The second gimmick allows state leaders to skip $65 million in payments into the pension fund for public employees this year. They plan to punt on an additional $620 million in payments over the next two years. As with the sales tax, they promise to start behaving themselves in 2013, when they're scheduled to begin paying off the backlog of pension obligations.

State workers, teachers and police officers might be reluctant to call this year's budget actions gimmicks. The truth is, those gimmicks saved hundreds of jobs. But it's equally true that Virginia will eventually have to pay the bills it's chosen to ignore for now.

McDonnell and legislators should keep that in mind as they decide what to do with this "surplus." They've already agreed to give state workers a 3 percent bonus in December, which will use up $83 million. That's a justifiable use of those funds. More than 40 percent of state employees earn salaries of $35,000 or less. They haven't had a raise since December 2006.

If there are additional dollars left, state leaders should earmark at least a portion for an early repayment into the pension fund.

Even a small gesture would show credit rating agencies that Virginia is serious about making good on the commitments it's pushed off to future years and future taxpayers. The party hats and noisemakers should be stashed away until there's a real cause for celebration.