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U.Va. economics expert offers long-term solutions

State’s Critical Financial Needs Require More Than A Quick Fix

November 29, 2001-- As a result of generous tax cuts followed by a major downturn in the economy, Virginia faces more than just a short-term fiscal crisis, a University of Virginia economist warned business and government leaders today.

After the state weathers the effects of the current recession and recent terrorist attacks, significant long-term problems will still need to be addressed, John L. Knapp, economics research director of U.Va.’s Weldon Cooper Center for Public Service, said at a Conference on Virginia’s Future held today in Richmond. The meeting was sponsored by the Coalition for Virginia’s Future, a nonpartisan business group composed of the Virginia Chamber of Commerce and 15 other statewide and regional business groups.

In addition to finding ways to bridge this year’s state budget gap of close to $1 billion, leaders must also figure how to support major programs adequately in the years ahead, Knapp said. These major programs that account for about two-thirds of state spending include transportation, higher education, K-12 education, and Medicaid.

The most daunting problem Virginia faces is transportation, especially highways improvements in the Washington, D.C. suburbs, Knapp said. The state’s most recent 20-year highway-needs assessment, using a moderate, rather than aggressive scenario, projected costs of $82 billion, he noted. That estimate doesn’t address needs such as mass transit, ports and airports.

Medicaid is another rapidly growing program in Virginia, that will create vast needs, as in K-12 public education, which is severely under funded according to a study released last week by the Joint Legislative and Audit Review Commission.

To deal with some of these needs, Knapp said that greater efficiency, reordering of priorities, increases in charges and fees, and borrowing are all possibilities that should be considered. A major bond issue would be another strong source of funding, he added.

Modernizing the state and local tax system in a way that considers state and local finances as a whole is another important goal for Virginia, Knapp said, because "the two levels of government are bound together." But restructuring the tax system won’t solve all the state’s problems, he said.

Politicians, taxpayers, and the Virginia business community should be prepared for tax increases, Knapp said. The overall tax burden in Virginia is low compared to other states, he said, "and it is unrealistic to take this major source off the table," he said, adding that income tax, gasoline tax, and motor vehicle sales tax all should be examined for increases, while taxing Internet sales should also be considered.

Contact: Bob Brickhouse, (434) 924-6856

FOR ADDITIONAL INFORMATION: Contact the Office of University Relations at (804) 924-7116. Television reporters should contact the TV News Office at (804) 924-7550.
SOURCE: U.Va. News Services


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