Virginia's Economy is Too Dependent on Defense and Homeland Security Spending.

The state Senate Finance Committee just held a retreat for its members. That's a good thing, IMO. Staff reports indicated that the state's economy continues strong, but it is slowing. First quarter collections from personal income tax withholding and sales tax are lower. Non-withholding revenues (estimated tax payments) that come mainly from small business owners are slowing also. Needless to say, proceeds from the real estate industry are down substantially, especially in the area of the state recording tax. (But then, it's fair to say that the real estate boom pushed those revenues into windfall territory. It's time for an adjustment.)

Here's Virginia's previous strength that is now becoming a liability. "Virginia’s reliance on federal spending has increased. - Homeland security spending is leveling off and wartime defense contracts will eventually follow the same course." (Interestingly, I suspect that many of the people who earn their livings with these "hard government" contracts voted for Jim Webb, who gave the "soft government" Democrats a US Senate majority. But that's a subject for the future.) The state Senate Finance Committee sees the big growth in federal spending for Virginia slowing.

The report continues: "Signs of a softening economy, especially in the housing market and federal spending, may be more apparent this time next year as you begin to craft the 2008-10 budget."

"Fewer discretionary dollars will be available than in recent years. To the degree that discretionary funds are available, caution should be exercised to: - Avoid expanding obligations; - Avoid partially funding initiatives with major outyear costs; and - Continue to employ volatile, hard-to-project revenues for one-time uses."

What do people think this means? IMO, Governor Kaine's big, expansive plans to fund pre-school education are dead.