HD35 - Review of State Spending: December 2005 Update


Executive Summary:
Review of State Spending: December 2005 Update


Section 30-58.3 of the Code of Virginia requires the Joint Legislative Audit and Review Commission (JLARC) to develop an annual report on State spending growth over the prior ten years – from FY 1996 through FY 2005. This report is the fifth in JLARC’s series on State spending.

Over the past decade, Virginia’s operating budget increased by 80 percent, growing from $16.3 billion in FY 1996 to $29.3 billion in FY 2005. When adjusted for inflation, the budget increased by 45 percent. When inflation and population growth are taken into account, the budget increased by 30 percent, an average annual increase of three percent.

The ten-year period under review included the period of economic growth of the late 1990s, reflected in three consecutive years of double-digit growth in Virginia’s general fund revenues. The period also includes the downturn of FY 2002, when the general fund actually decreased 3.8 percent.

A variety of factors influence State spending, including economic conditions, federal mandates, State initiatives, agency workload changes, and policy choices. The primary factors driving State spending growth over the ten-year period were inflation, population growth, and economic growth.

Budget growth is highly concentrated in the largest State agencies and programs, which constitute the traditional core services of State government. In fact, 20 agencies (out of more than 140) accounted for 91 percent of the budget growth over the period. Three agencies accounted for nearly half the appropriations growth: the Departments of Education, Medical Assistance Services, and Transportation.