36 ADDRESSES AND. STATE PAPERS

Until this year these projects have been primarily financed from
borrowing. The only exception to this has been inclusion in the
operating budget of projects costing less than $50, 000, but these
amounts are small. For example, last year they totaled only $1. 2
million.

This budget recommends a major change in that policy. We have
provided for $10 million of current revenue to be used as a down-
payment for capital construction projects. Prudent financial manage-
ment dictates that we make a substantial down-payment from current
revenues against capital costs. Ideally, during periods of high eco-
nomic activity, a significant portion of our construction should be
financed from current revenue in order to conserve our bonding au-
thority for periods of economic distress. It is well known that eco-
nomic slumps cause the dual problem of increasing State costs for wel-
fare, health, mental hygiene and other programs, together with re-
duced tax revenues. During such periods it is desirable to continue, or
even expand, State construction programs in order to help pump new
blood into a lagging economy. If State borrowing power has been con-
served for such a contingency, it is possible to carry out such programs.

An equally important reason for financing capital projects from
current revenues is to save the taxpayer money. Borrowing increases
the cost of construction by up to one-third for interest alone. In the
long run, if we finance all construction by bond issues, we are getting
only $3 worth of construction for every $4 expended in tax money. It
is possible to justify borrowing for unusually large or nonrecurring
items. For example, most people buy their homes that way because
the total cost represents more than their annual income. However, this
reasoning does not apply to annual construction programs which will
continue for the forseeable future.

Were the revenue picture brighter, I would have recommended even
more current revenue for capital construction; but at least the $10 mil-
lion we have provided is a beginning for this policy. We hope to find
ways to increase the amount in the future, and to this end I shall work
with the Senate Finance Committee and the Ways and Means Commit-
tee of the House of Delegates.