Kaine Warns Of 'Painful' Cuts In Va. Services

$1.5 Billion Gap Opens in Budget

By Anita Kumar

Thursday, August 20, 2009

RICHMOND, Aug. 19 — Virginia Gov. Timothy M. Kaine said Wednesday that he might be forced to cut core services, including education, health care and public safety, lay off employees and borrow money from the state's rainy day fund to make up a $1.5 billion budget shortfall.

"Everything is under review," Kaine (D) said. "We've got some very painful decisions to make."

Kaine will announce specific cuts early next month after reviewing recommended trims of as much as 15 percent from each state agency.

"When you have to do this kind of reduction, I don't think you take anything off the table," said Del. Phillip A. Hamilton (R-Newport News), vice chairman of the House Appropriations Committee.

Hamilton said the cuts will most likely include public education, which takes up a third of the budget. "If it's not directly related to the core mission of educating children, I think we have to look at it," he said.

Kaine's speech Wednesday to members of the House and Senate money committees marks the fourth time since September that he has scaled back the state's forecast for tax and fee revenue.

The day before, Transportation Secretary Pierce R. Homer announced that the state is projecting an additional $900 million revenue shortfall — a total of $4.6 billion over six years — in a separate fund that pays for roads and bridges.

Those announcements came as other governments in the region continue to wrestle with the recession's effects. Maryland has a $700 million shortfall this year, and the D.C. Council has approved higher taxes to help close a $666 million shortfall over the next three years.

In Virginia, revenue projections have been lowered by $5.6 billion since July 2008, resulting in deep cuts in education, law enforcement and health care and the elimination of hundreds of jobs. An infusion of federal stimulus money helped the state avoid deeper trims.

The shortfall announced Wednesday reflects $1.2 billion from this fiscal year, combined with $300 million carried over from the previous fiscal year.

State revenue collections fell 9.2 percent last year — the most significant drop in modern history — because of dramatic reductions in individual and corporate income tax collections and a decrease in recordation taxes, sales taxes and lottery money. State revenue collections are projected to fall 1.6 percent this year. It is the first time revenue has been projected to decline for two straight years, Kaine said.

Kaine said this month that he would reduce the state's revenue forecast from $700 million to $1.5 billion. "The numbers are realistic, and they're tough," said Sen. R. Creigh Deeds, the Democratic gubernatorial nominee.

But many legislators have long accused Kaine of being overly optimistic when it comes to the state's finances. Lt. Gov. Bill Bolling (R), who presides over the Senate, continued to criticize Kaine on Wednesday, saying the shortfall was expected because previous budgets were based on money the state did not have.

"For the past four years, we have based our budget on overly optimistic revenue projections, the use of one-time revenues to pay for ongoing programs, spiraling amounts of state debt and raids on the rainy day fund," he said. "That is not fiscally responsible."

House Speaker William J. Howell (R-Stafford) said he was pleased that Kaine "has finally taken a realistic view on the projected budgetary shortfall."

Kaine said that he has seen signs that house and car sales, employment rates and the stock market are starting to rebound but that the state treasury has not felt the results.

"While it is early, there are positive signs for the longer term that should make us feel a sense of optimism," he said.

The General Assembly passed a two-year, $77 billion budget this spring that used $1.5 billion in federal stimulus money to help offset a $3.7 billion shortfall. About 379 state employees were laid off, and 510 employees were transferred or demoted.

Lawmakers agreed to put $160 million in reserve for future economic problems. The state will use that money but would need to find more.

Tagged: budget, Gov. Tim Kaine, politics, State news

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