SUMMARY:  Given the unlimited good ideas for more public spending and the constraints of the heaviest local tax burden on taxpayers, it's time to begin a serious discussion of a yearly spending cap for the County's operational budget. One way a cap might work is to add the rate of population growth, the rate of inflation, and half the increase in GDP. If such a cap had been in place for FY 2006, the increase in the County's budget would have been 6.8%, not the 9% by which the budget was actually increased. To provide flexibility for special situations and emergencies, a simple majority of the Board of Supervisors could initiate a voter referendum on a budget increase above the cap level for a given year.

It's a basic principle of economics that wants are unlimited while resources are limited. There is virtually no spending item that doesn't have its own constituency ready to testify to an even greater need for the outlay of limited governmental funds. It is the job of elected officials to prioritize these needs through the budget. It's not a job they like much; setting priorities means putting the need that someone holds dear at the bottom of the list, giving it less money, or giving it no money at all.

Fairfax County voters will be excused for thinking that the Board of Supervisors' budget is an attempt to try to make everyone happy. In a time of rising real estate values, the County can depend on rapidly rising revenues from the real estate tax. The Board's strategy seems to be to reduce the real estate tax rate to only partly compensate for this increase, with the rate set just below the point at which the villagers march on the castle with pitchforks and torches. Of course, the total amount of real estate tax paid by each homeowner goes up, just as it has every year for the last five years, in both good economic times and bad, while actual cuts to the budget are few and far between. In FY 2006, which started in July 2005, the budget increased by about 9% over FY 2005.

Forward Fairfax believes that it is time to begin a discussion of a yearly spending cap for Fairfax County's operational budget that will lessen the impact on the taxpayer and force the County government to exercise some self-discipline. Spending caps, such as Colorado's TABOR (Taxpayer Bill of Rights) have received a bad reputation in some quarters. It is alleged that they aren't flexible enough to cover emergencies or sudden needs that arise. We'll address some of these problems below.

The starting point for a cap would be the population growth in the County and the annual level of inflation. County demographic information shows that population growth has run an average of 1.43% over the past five years, was 1.85% from 2004 to 2005, and is projected to increase by 1.7% over the next five years. The annual rate of inflation (change in the consumer price index) in 2004 was 2.75%. Combined, those two totaled 4.6%. If the Board of Supervisors desired, they could set an additional increase beyond that point. One idea would be to tie this additional increase to the annual growth in GDP, or some percentage of that increase. That would allow the County to share in the increased level of prosperity (or, in bad times, tighten its belt accordingly).

In the example described above, if the additional increase had been half of the GDP growth rate in 2004, 4.4%, that would have added 2.2% to the cap, giving a total budget increase of 6.8%, or 2.2% less than the actual increase. In dollars, that's about $61 million less than the FY 2006 budget.

In times when revenues exceed the total cap goal for spending, half of the increase should be refunded to taxpayers through tax cuts and half should be devoted to one-time projects which will not commit the County to the same expenditure in subsequent years. Examples of such expenditures include additional road, school, and public facility construction, the purchase of land for parks and recreation, or the early replacement of capital equipment or retirement of expensive debt. Raises for employees or the provision of new services to County residents would not be appropriate for such revenue surpluses since they would require continuing expenditures in both good economic times and bad.

How do you allow for flexibility under this plan? As with the proposed TEL (Tax Expenditure Limitation) in Ohio, a simple majority of the legislative body, in this case the County Board of Supervisors, could initiate a voter referendum on budget increases above the cap level. If the voters approved, the increase would be authorized for that year. Additionally, the County's "rainy day" fund would, as always, be available for emergencies.

Of course, the County Board would not be obligated to increase the budget up to the cap limit. It could in all prudence spend less. The unwillingness of elected officials, however, to turn away or reduce the funding of any good cause is what brings us to a discussion of a cap in the first place.

Copyright Forward Fairfax and Doug Boulter, 2005