While State Senator Richard Saslaw is on vacation I get the privilege of writing a bonus Richmond Report - and as luck would have it, it's the first column of 2015, or the last column of 2014 for some of you who may be reading this online. In either event, it is a good time to take a look back at the year that's just passed, and make some forecasts and predictions about the year to come.
While the stock market continues to reach new heights and national economic data indicates the economy grew faster than we realized in 2014, the news isn't as rosy for the state and local economy. 2014 was a tough year for many Virginians, and that's reflected in the Virginia Budget.
In the past Virginia and Falls Church's proximity to the nation's capitol made our economy nearly recession proof. When we did go into recession, things didn't get as bad as the rest of the country, and we tended to recover much more quickly. That proved not to be the case in 2014.
In fact, in this post-fiscal cliffpredictions) era of sequestration and federal austerity, the opposite appears to be true. Virginia's economic performance and recovery from the Great Recession is actually lagging the rest of the country, according to economic data relied upon by the House of Delegates Appropriations Committee and the Senate Finance Committee.
For instance, Virginia's unemployment rate prior to the Great recession was 3.0 percent, and the national rate was 5.0 percent. After peaking at a high of 10 percent, the national unemployment rate now stands around 5.9 percent. In Virginia our unemployment rate is still 5.6 percent, much closer to the national rate than before the recession.
That statistic alone is sobering enough. Unfortunately, it only tells part of the story. Many of the jobs lost during the great recession were high-paying ones in the Professional Services sector. In Virginia, those jobs are being replaced with jobs in lower paying sectors like leisure and hospitality, health, and education. Although the Commonwealth continues to show net job growth, that growth is in fields that pay roughly one third as much as the jobs that were lost. That's had a significant impact on General Fund revenues to the Commonwealth, which relies heavily on the state income tax.
With less money to spend, the Governor and General Assembly have been forced to make budget cuts to the biennial budget adopted early in 2014. During the upcoming 2015 session, we don't need to pass a new budget, but we do have the opportunity to influence how and where the reduced revenue will impact state services through the budget amendment process.
The end of sequestration budgets and a return to higher levels of federal spending don't appear imminent, meaning Virginia will continue to suffer from the underlying issues that are causing our economy to limp along at the state and local level in 2015.
If things are to get better, we in Richmond will have to redouble our efforts to diversify the Virginia economy by attracting new industries and business to Virginia. We need to attract them with our world class schools and the talented workforce they produce. We need to address the shortcomings of our transportation infrastructure so that we can sell the great quality of life Virginia has to offer our residents - when they aren't sitting in traffic. And we have to improve Virginia's brand as a progressive, forward looking place to live work and raise your family, no matter the composition of that family.
A few weeks ago the Governor laid out a blue print for closing our budget gaps while increasing investments in areas that will help grow and diversify Virginia's economy, including $1 million for a regional private sector-led workforce development competition. That's right, a $1 million prize to incentivize the private sector to find an innovative solution to develop a 21st century workforce. Those are the kind of innovative ideas we need to improve our economy.
Yours in service,