State of the Commonwealth: Virginia
While not facing problems of the same magnitude as states like New York or Connecticut, the Old Dominion certainly faces some challenges. In four short years, Virginia has slipped from 3rd to 13th place in economic outlook according to latest edition of the Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index. This precipitous decline in competitiveness is largely a result of tax increases, as well as the policy innovations in other states like North Carolina.
In his final State of the Commonwealth address, Governor Terry McAuliffe spent the bulk of his time discussing Virginia’s economic growth and development. The governor once again blamed federal budget cuts between 2011 and 2013 for the loss of $9.8 billion and 154,000 jobs. To his credit, the governor noted Virginia’s economy had too often “floated atop a massive wave of federal spending,” becoming overly reliant on that manna from the federal government. Governor McAuliffe called for a redoubling of efforts to make Virginia more attractive to businesses, especially those in the cyber, bioscience and manufacturing industries. His key message throughout the address was a push for lawmakers and citizens to create “a more open and welcoming climate” to draw families and businesses from all walks of life.
While the governor rightfully aspires for a revitalized and growing Virginia, the policies and initiatives of his administration do not propel the Commonwealth towards those ends. Governor McAuliffe noted the addition of 167,000 jobs over the last three years and an unemployment rate of 4.2 percent as proof of the state’s upward trajectory. He also touted winning a $120 million resiliency grant and its use for the protection of Hampton Roads from sea-level rise. No doubt, these jobs are welcomed by the community, but fostering a better environment for all businesses to grow organically throughout the state would be even more welcomed. Virginia’s business tax rate currently sits at 6 percent. This is woefully noncompetitive with neighboring North Carolina at 3 percent. It is not surprising that North Carolina’s GDP growth from 2013 to 2015 led the nation at 13.4 percent, where Virginia only netted around 2.2 percent.
Instead of focusing on policies that could reduce barriers to business and job growth, Governor McAuliffe spent much energy excoriating Republicans for continually pushing back on his agenda. The governor also voiced support for expanding Medicaid under the Affordable Care Act and asked lawmakers to set sights on improving the state’s healthcare services and to address the opioid crisis, proclaiming, “400,000 people living without healthcare is a problem.”
Turning back to the economy, Governor McAuliffe reaffirmed a commitment to generating jobs and addressing the $1.2 billion budget deficit. Faltering tax revenues are a substantial part of Virginia’s budget crisis, but excessive spending and government inefficiency are a larger problem. If Governor McAuliffe and lawmakers wish to return Virginia to the top-5 in economic competitiveness and usher in a return of vibrancy and prosperity within the Commonwealth, pro-growth tax and regulatory reforms are vital. Businesses will continue to flee to other states, taking along wealth and opportunity until the engine of economic growth in Virginia is released from the chains of tax and regulatory bondage.