- The Washington Times - Monday, July 25, 2011

RICHMOND — Virginia is facing a shortfall of about $800 million in its next budget, according to a report released Monday by think tank Commonwealth Institute for Fiscal Analysis.

The left-leaning group based its report on state spending assumptions for the 2012-14 budget.

“As a number of key public officials like the governor, lieutenant governor and secretary of finance have noted lately, we’re not out of the woods yet,” said Michael Cassidy, president of the Richmond-based group. “In fact, we’re still very much stuck in the forest when it comes to having the resources available to provide for the needs of the people of Virginia.”

The report assumes Virginia will continue at the funding levels passed in the current two-year, $80 billion budget, adjusted for the state’s own projections of spending changes in 2013 and 2014.

Virginia is indeed recovering from the depths of the recession, but revenues remain at pre-recession levels and the need for such public services as food stamps and Medicaid enrollment are at their highest levels since the recession began, according to the report.

The state has relied on a combination of cuts, federal stimulus dollars, and money from its rainy day fund to close revenue shortfalls in recent years - an approach that is not sustainable in the long run as one-time fixes such as stimulus dollars dry up, the report states.

“If Virginia chooses to close this future budget shortfall with a cuts-only approach, it will impede our economic recovery and cost jobs in both the public and private sectors,” Mr. Cassidy said.

Tucker Martin, a spokesman for Republican Gov. Bob McDonnell, did not agree with the report.

“The Commonwealth Institute has long argued for higher taxes and bigger government,” he said. “They regularly issue reports designed to make their case for more and more government spending. We respect their right to that position but disagree strenuously with it. Gov. McDonnell has made state government smaller, reduced state spending to 2006 levels and produced back-to-back budget surpluses.”

The report follows an up-and-down week for Virginia finances.

On July 19, the state learned that its highly prized AAA bond rating was being put under review by the credit rating agency Moody’s as a result of the federal budget impasse. The announcement was made the same day the governor announced a $311 million revenue surplus for the fiscal year that ended June 30.

On Friday, the Labor Department reported Virginia lost 14,600 jobs in June. In addition, the state’s seasonally unadjusted unemployment rate ticked up to 6.3 percent as household employment dropped after 10 straight months of increases. However, the seasonally adjusted rate held steady at 6 percent, as the national rate increased 1 percentage point in June, to 9.2 percent.

Virginia has since February 2010 added 48,200 net new jobs - the 11th-highest total in the country. And its unemployment rate has fallen 1.2 percent - the third-highest percentage drop in unemployment rate in the Southeast for the time period, behind North Carolina and Kentucky.

“The governor will continue to implement [a] conservative, common-sense approach that is helping the private sector create new jobs and our economy get back on track,” Mr. Martin said.