It’s the middle of Virginia’s budget season - meaning lawmakers and the Governor are figuring out how to spend more than 50 billion. But this year, you may be hearing the words “budget shortfall” a lot in the news. Mallory Noe-Payne set out to understand exactly what that means and why it’s happened.
Virginia doesn’t actually have the money in the bank before it decides how to spend it, instead we draw up a budget based on economists’ predictions of how much we’ll collect in income and sales taxes.
“It’s hard to predict the future exactly," says Laura Goren - a policy analyst with the Commonwealth Institute. “And when you’re talking about a state budget that funds our public schools and our colleges and healthcare we’re talking about a fair amount of money so even a small error in forecasting can result in a pretty big shortfall.”
And that’s what happened this year -- a shortfall. Economists saw growing wages and shrinking unemployment so they assumed tax collections would be up by a corresponding amount. Then they weren’t.
"It may be that with a shift to more contracting and the so-called gig economy that folks who are paid as an independent contractor don’t know or choose not to report that income to the state and pay taxes like they’re required to do," Goren suggests.
Regardless the reason, lawmakers are now left to decide how to close the gap. They’ll be getting down to work in the New Year.