Virginia Budget Cuts Will Cost 37,000 Jobs, New Study Finds

Cuts in state spending on health care and education approved in the budget passed by the Virginia General Assembly will result in the loss of 37,000 jobs and over $2 billion in reduced economic activity, according to a report released by the Richmond-based Commonwealth Institute for Fiscal Analysis last week.

According to the report, unveiled in a telephone conference calls with journalists last week, “Amid talk of spurring growth and creating jobs, Virginia’s legislators have assembled a budget that will result in significant layoffs in both the public and private sectors. While the cuts included in the Conference Report bring the budget into balance on paper, such cuts have real world effects that do not reflect a balanced approach to addressing the state’s fiscal crisis.”

Del. Jim Scott (D), who represents Falls Church in the House of Delegates, confirmed to the News-Press that the Commonwealth Institute is “provides well-qualified, respected analysis,” and that it is true that the budget cuts “will have a serious impact.”

He noted that the Republican-dominated House would consider no proposal to raise revenues, such as a local sales tax option he introduced to help overcome shortages in school budgets.

Using nationally-recognized economic modeling methods, the report estimates that the compromise budget passed two weeks ago “will cause significant job losses in the state over the course of the next two years.”

Cuts in health and human resource funding will cost 37,000 jobs and $2.2 million in lost gross domestic product, the report finds, and a $1.5 billion loss in personal income.

With these consequences, the stated priorities in the budget that are focused on new economic development will be more than offset by economic losses in these critical areas, the report concludes.

The challenge facing the legislature, and Gov. Bob McDonnell, has been to close a $4 billion gap between current revenue levels and former expenditures, a gap caused by the wider impact of the national recession.

“When states cut spending, they lay off workers and cancel contracts with vendors, which places an additional drag on the economy at exactly the time the state needs a boost in consumer demand,” the study notes. “The fragile economic recovery in the state could be torpedoed by this latest hit on Virginia’s economy.”

In the compromise budget, theĀ  job losses will be felt most acutely in employment related to the health care sector, including hospitals, nursing homes and residential health care facilities. Large job losses would also occur in K-12 education, in addition to the state’s retail and construction sectors.

“Our lawmakers don’t want to acknowledge that the cuts they have included in the budget are going to result in substantial job losses, not gains, and in numbers that dwarf gains projected by their economic development initiatives,” said Michael Cassidy, executive director of the institute.

The budget was evaluated by the institute using the Regional Economic Models Incorporated (REMI) multi-regional model. It is an input-output econometric model used for dynamic forecasting analysis. It includes 70 detailed industries and uses inter-industry relationships to estimate the impacts of specific policy changes on the economy.