State Budget Practice Report Cards and Budget Resource Guide

Virginia was one of only seven states to earn A’s in 2016 and 2017 for budget forecasting, one of five budgetary categories evaluated by the Volcker Alliance for fiscal 2015 through 2017.

The grade marked an improvement from 2015, when Virginia received a C, in part for starting the fiscal year without making adequate adjustment for anticipated shortfalls. The state follows the best practice of using consensus revenue forecasts from two groups whose members include representatives of the executive and legislative branches, as well as outside experts. While consensus forecasting is not necessarily more accurate than estimates prepared by a single agency, it helps create a budget based on an agreed revenue number. In addition, Virginia uses multiyear forecasts for revenues and expenditures.

The state scored straight A’s in the reserve funds area. It has policies for using and replenishing such savings: Virginia’s constitution requires that the General Assembly authorize the withdrawal of rainy day fund assets, and no more than half of the fund balance can be tapped in any fiscal year.

The state’s lowest average grade, a D-minus, was in legacy costs, which include public worker pensions and other postemployment benefits (OPEB), principally health care. While its pension system has 75 percent of the assets needed to meet obligations—3 percentage points more than the 2015 average of all states—Virginia failed to make its actuarially determined pension contributions in 2015, 2016, and 2017. To remedy the underfunding, the state has accelerated its payment schedule for four of its five funds; the fifth—the teachers’ fund—is slated to receive 100 percent of its actuarially determined contribution in fiscal 2018. The state also failed to make its actuarially determined OPEB contributions in fiscal 2015 through 2017.

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2017 Volcker Alliance report, Truth and Integrity in State Budgeting: What Is the Reality? which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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