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Virginia mulls cuts, even layoffs, in budget

Governor meets with brain trust

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RICHMOND — Virginia Gov. Bob McDonnell on Tuesday laid the groundwork for state budget cuts — and perhaps even layoffs — after huddling with a brain trust of legislators and business leaders forecasting the national and state economic picture in coming years.

The Governor's Advisory Committee on Revenue Estimates considered the state's economic outlook as one of the final steps before Mr. McDonnell unveils his one complete, biennial budget next month.

Mr. McDonnell said there was a "reasonably broad embrace" of economic forecasts predicting 3.7 percent growth in the state in 2012, estimated 3.3 percent growth in 2013, and 4.6 percent growth in 2014.

The biggest issue that they’re concerned about is the inability of Washington to actually [reach] solutions on big things,” he said.

Mr. McDonnell said the group cited the failure of the congressional supercommittee to agree on budget savings of $1.2 trillion over the next 10 years by its mandated deadline.

"This is a small challenge, relatively, that the supercommittee had and they couldn't get that done," he said.

Mr. McDonnell also predicted some pain ahead, which could include layoffs, to balance the needs of programs like Medicaid and the Virginia Retirement System. The House and Senate money committee staff has forecast a potential state budget shortfall of between $600 million and $1.5 billion in the next two years.

"You need 5 or so [percent] revenue growth just to remain even," he said, "and we're not going to get that."

Mr. McDonnell's government reform commission has provided recommendations to streamline state government, some of which involve consolidating or eliminating boards and agencies. The governor cited health care and social services as some areas with "multiple programs that all seem designed to fit the same purpose."

He said he was "not looking at any major layoffs, per se," but that potential staff reductions among the state's 103,000 employees likely would come from consolidating agencies and functions.

"To the degree that government reform efforts would cause a shrinking of government, then there will be some [layoffs]," he said. "I think people should expect some reductions in spending in some areas of the government."

Lt. Gov. Bill Bolling, while sharing Mr. McDonnell's cautious financial approach, said there was a sense of optimism in that Virginia's economy is performing better than almost any other state in the country.

He said that, since the start of the administration in 2010, 67,000 net new jobs have been created — the ninth highest number in the country — and the state's 6.4 percent unemployment rate is the third lowest of any state east of the Mississippi River.

Mr. Bolling also noted that conservative budgeting over the last few years has worked well for the state.

"That's helped us produce budget surpluses as opposed to getting carried away with the revenue numbers and then end up with budget shortfalls, which has been done in the past," he said.

Still, the General Assembly will be faced with tough choices. Mr. McDonnell said that he has been carefully examining proposals of 2 percent, 4 percent, and 6 percent savings plans he directed agencies to submit to him in September.

"This cannot be another status quo session. The status quo budget's going to have to be innovative and reform-oriented and [there] will have to be certain cuts," he said. "My goal is to make sure that we preserve core services and don't inflict too much pain in any one area, unless it's an area that we feel that government shouldn't be involved in."

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