The Northern Virginia Daily's Political Depot

A service for our readers outside the Northern Shenandoah Valley... a sampling of The Daily's political coverage, plus unofficial, 'reporter's notebook' stuff. And occasional dry humor...

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Location: Strasburg, Virginia

Saturday, November 26, 2005

Reports: D.C. is driving NoVa growth; B3

By Garren Shipley
Daily Staff Writer

Virginia is in high fiscal cotton right now, with billions in budget surpluses, low unemployment and a booming housing market.

But the source of all those good times, particularly in Northern Virginia, is north of the Potomac.

Federal spending is one of the major drivers of the economy in the state’s top-right corner, according to a number of analysts.

A study of federal procurement by economists at George Mason University released in June found that federal spending in the greater Washington area has been on a record pace in the past few years.

One out of every three dollars spent in Northern Virginia, Washington and suburban Maryland comes from federal coffers, according the study’s author, Stephen Fuller, the head of the university’s Center for Regional Analysis.

Since 1980, federal spending in the region has grown from $4.2 billion to $50 billion, an increase of 1,100 percent, compared to an increase of slightly more than 100 percent across the country.

In 2004, the Washington area got 15.7 percent of all federal procurement. Of that, 32.2 percent went to Fairfax County, Falls Church and the city of Fairfax.

In Northern Virginia alone, federal procurement spending rose 19.1 percent, for some $4.2 billion, from fiscal 2003 to fiscal 2004. The vast majority of that spending came from the Department of Defense.

Since the end of the 2001 recession, Virginia has added back all of the jobs that were lost plus 90,000, according to information compiled by the state Senate Finance Committee’s staff.

Of those jobs added during the rebound, 65 percent were created in Northern Virginia. Of those, over half are related to federal spending.

Following the “dot com” bust of 2000 and 2001, the state ended fiscal 2002 with a general fund shortfall of $237 million.
But once the federal spending boom that took place after the Sept. 11 terror attacks began to work its way into the state’s economy, those numbers turned around.

In 2003, the state recorded a $55 million surplus, followed by a $323.8 million surplus in 2004. Fiscal 2005 ended with a $544.6 million bankroll. Senate budget officials estimate that fiscal 2006 will end with about $860 million in the bank over budget.

There’s pressure to clamp down of federal spending, said Rep. Bob Goodlatte, R-6th, but don’t look for a reduction anytime soon.

“I don’t think there’s any danger that it’ll stop, but I certainly hope the pressure to tighten up the federal budget … continues,” he said.

The Defense and Homeland Security departments pour lots of money into Northern Virginia, but that growth will be clipped in the near future.

“I think those are going to be tightened up just like everything else will,” he said.

That has some lawmakers in Richmond concerned.

Senate Finance Committee Chairman John Chichester, R-Fredericksburg, warned his colleagues at a retreat last week that the state’s economy will cool off.

“There is uncertainty in this economy, and the booming revenues that flow from it,” he said. “Listen to that little voice in your head that says ‘go slow.’ Take it easy. Don’t overextend the way we did last time.”

Documents prepared for the retreat warn that Virginia’s economy could take a hit if the feds back off.

But pinning fiscal hopes on higher federal spending is a bad way to do business, according to Richard Cothren, a professor of economics at Virginia Tech.

Federal spending eventually is going to crowd out other spending,” he said. “If the feds are going to spend more, then eventually the rest of us are going to have to spend less.”