Virginia. Gov. Bob McDonnell, citing the looming "fiscal cliff" of tax hikes and spending cuts set to kick in at the start of next year, a sluggish economy and other budget pressures, is ordering state agency heads to outline potential cuts of 4 percent to their departments.
Foremost among the potential headwinds, McDonnell chief of staff Martin Kent wrote in a memo to agency heads, is the "unprecedented uncertainty in Washington and its detrimental effects on this state."
"The so-called fiscal cliff in the third quarter of fiscal 2013, including the sequestration provision of the Budget Control Act of 2011, could touch off an economic retraction or even a second recession," he wrote. "National economists have downplayed any expectations of a near-term, vigorous recovery and confirmed the direct connection between the existing economic uncertainty and the potential for future revenue stagnation or losses. In the face of this uncertainty, it is our constitutional responsibility to prepare for the associated risk."
Mr. Kent also wrote that health care cost increases and statewide Medicaid costs will further strain state resources, and any new revenue growth not already programmed into the state's two-year budget the General Assembly passed in a special session this year "likely will be limited."
McDonnell spokesman J. Tucker Martin said the exercise, which must be completed by Nov. 21 as the governor and his finance team prep for the 2013 General Assembly session, is routine but that its importance is heightened this year because of the fiscal cliff and the other budget pressures.
"We're just seeking ideas for savings at this time, not making final decisions," Mr. Martin said.
Mr. Kent wrote that agencies should focus on the lowest priorities, rather than personnel, and on recurring savings instead of one-time cuts.
"Please specifically look at service and program areas where state funds are used to match federal funds or other nongeneral funds," he said. "You need to ask if the use of these funds, state and federal, is achieving outcomes that are of the highest priority for use of the general fund match. You should not consider these programs as 'off-limits' for savings and efficiency strategies just because they may result in the loss of matching funds."
Higher education institutions were not included for the purposes of the memo but will be addressed separately, he wrote.
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