Bond Ratings and Reasons to Raise State Taxes
One of the reasons Virginia Governor Mark Warner (D) gives for increasing Virginia's taxes is that Virginia risks losing its AAA bond rating. Today's editorial in the Northern Virginia Journal notes that while Virginia total debt is lower than most states with AAA bond ratings, Moody's placed the state on it's "watch list" last September. The editorial cites a paper written for the Virginia Institute of Public Policy by University of Georgia professor William Kittredge who identified a problem associated with the Virginia Localities Intercept Program. The problem is that Virgnia is responsible not only for its own debt, but also for payment on the defaulted debt of its local jurisdictions. Kittredge notes that Moody's did not place Virginia on it's "watch list" solely for its own debt, but "in conjunction with" the intercept program. For example, Virginia is responsible for the defaulted debt of the city of Bristol and counties such as Lunenberg, Prince George, and Warren. The Journal editorial's conclusion has Kittredge pointing out that Moody's is "not insisting on a $1 billion tax hike. In fact, (Kittredge) calls Gov. Warner's claim that an historic increase is needed to protect the commonwealth's credit rating 'absurd on its face.'"