Terry McAuliffe keeps repeating bogus budget claim

Former and possibly future Gov. Terry McAuliffe keeps telling it wrong. 

"I inherited the largest budget deficit in the history of the state from the Republicans," McAuliffe, a Democrat who led the state from 2014-2018, tweeted on June 10.

We gave False ratings to this repeated claim twice in 2015 and once in 2019. McAuliffe did not inherit a deficit when he took office. His Republican predecessor, Gov. Bob McDonnell, left behind balanced budgets as required by Virginia’s constitution.

Virginia is the only state that bars its governor from serving successive terms. After sitting out four years, McAuliffe won this year’s Democratic nomination in a June 8 primary and is running against Republican Glenn Youngkin, a retired private equity executive. In addition to his tweet, McAuliffe made his bogus deficit claim at least two other times after the primary.

• "I inherited the largest deficit from Republicans,'' he told MSNBC on June 9.
• "Biggest debt became the biggest surplus," he told WTOP on June 10.

With little effort, we found four additional instances of McAuliffe making the claim this year while he was campaigning for the nomination:

• While announcing his education plan on Jan. 21;
• While announcing his economic development plan on Feb. 18;
• During a Democratic debate on April 6;
• In an interview with NBC29 on May 11.

Let’s examine the facts. Again.

The inheritance

Why does McAuliffe keep saying he inherited a deficit?

"At the beginning of his time as governor, Terry McAuliffe faced a state budget prepared by his Republican predecessor that did not end up having enough revenue to cover the operating expenses," Renzo Olivari, McAuliffe’s campaign spokesman, said in a prepared statement. "Not having enough revenues to cover expenses is the definition of a deficit."

In fact, McAuliffe inherited two balanced budgets bills, but then was faced with economic problems that — while not his fault — caused revenues to crash.

The first bill left by McDonnell put his finishing touches on the outgoing two-year budget, set to expire June 30, 2014. The proposal anticipated $35.4 billion in general fund revenues and $34.9 billion in expenses.

The second bill was McDonnell’s proposal for the coming two-year budget, which began July 1, 2014. He anticipated $37.8 billion in general revenues and proposed $37.7 billion in spending.

McAuliffe took note of the falling revenues shortly after taking office in January 2014. Economists tied the slowdown to two factors:

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• Tax cuts ushered in by former President George W. Bush expired in 2013, causing the capital gains tax to rise. As a result, there was a surge of people cashing in capital assets before the higher rates took effect, followed by a lull after the levy went up. The lull caused a steep drop in non-paycheck tax receipts in Virginia in 2014.
• Federal spending cuts hurt Northern Virginia, the state’s economic engine.

McAuliffe sensed the problems shortly after taking office, but initially underestimated their severity. On Feb. 12, 2014, he cut the revenue estimate in the coming two-year budget McDonnell proposed by $140 million. "Although our underlying economic forecast has not changed," McAuliffe said, "it is clear that the current revenue receipts warrant attention."

The takeaway: One month into office, McAuliffe said McDonnell’s revenue estimate was $140 million high, but retained "the underlying economic forecast" McDonnell’s budget was built on.  

In May, the shortfall caved to an estimated $1.5 billion. The General Assembly and McAuliffe that month agreed to a new two-year budget going into effect July 1 and patched the revenue hole by cutting $800 million in spending and drawing $700 million from the state’s rainy day fund.

Seven months into his term, on Aug.15, 2014, McAuliffe estimated the shortfall at $2.4 billion and ordered additional cuts to keep the new two-year budget balanced. In a speech to the General Assembly’s money committees, the governor said that out of caution, his forecast was deliberately "pessimistic."

Turns out McAuliffe did overestimate the shortfall and, after all the spending cuts, the state ended the fiscal year with a $550 million surplus.

Another falsehood

McAuliffe’s tweet also says that the $2.4 billion budget gap he faced was the "largest budget deficit in the history of the state." We rated this statement False in a 2015 fact check. A McAuliffe spokesman told us at the time that the governor "misspoke."

Records show the state faced a far greater crisis at the start of 2010, when McDonnell took office and Virginia was suffering the full effects of the Great Recession. Two reports by the General Assembly’s budget committees at that time identified a shortfall of almost $4.5 billion for the two-year budget that would begin July 1, 2010.

We should note that The Washington Post, in a June 14, 2021 fact check, gave McAuliffe’s tweet "Four Pinocchios," its lowest rating.

Our ruling

McAuliffe tweeted, "I inherited the largest budget deficit in the history of the state from the Republicans." 

In fact, he inherited two balanced budgets from his predecessor and then, in the first months of his governorship, saw state revenues shrink because of federal policies. In addition, the revenue shortfalls that ensued were not the largest budget gaps in state history.

After repeatedly being called out by fact-checking on this claim over several years, McAuliffe should know better. Yet he keeps repeating it in his current campaign. We rate his statement Pants on Fire!