- The Washington Times - Saturday, November 17, 2001

The slowing economy will create a $1.2 billion shortfall in Virginia's current two-year, $50 billion budget a gap that could force the General Assembly next year to freeze pay raises for state workers for at least a year.
Lawmakers learned yesterday that covering the shortfall may require dipping into the state's "rainy day" fund estimated at $1 billion to help pay the state's bills. It also means the car tax may not be eliminated for a few more years, some lawmakers said.
State budget analysts said yesterday the budget gap is expected to grow to $1.5 billion in each of the next two budget years, in July 2002 and July 2003, as mandatory spending will continue to rise.
"It's rather Draconian," said state Delegate Vincent F. Callahan Jr., Fairfax Republican and chairman of the House Appropriations Committee. The committee was debriefed by legislative budget analysts in Richmond yesterday on the status of the state's economy.
"I don't see where the money is there to do pay raises," Mr. Callahan said. "We'll just have to dip into the rainy day fund, perhaps half of it, to help pay the bills."
Delegate Marian Van Landingham, Alexandria Democrat, called the situation "serious." "The rainy day fund could help some, but it won't be enough to cover some things," she said last night.
By law, lawmakers can dip into the rainy day fund if the state is two fiscal quarters into a recession which Ms. Van Landingham says appears to be the case now.
The grim report came less than 24 hours after Gov. James S. Gilmore III announced state revenue for fiscal 2002 was expected to be $890 million less than projected. The loss in revenue forced the Republican governor to delay the full phaseout of the car tax, which was scheduled to occur next year, because the state can't afford to fund it.
Members of the committee and other delegates were not surprised to hear about the shortfall.
Delegate James H. Dillard II, Fairfax Republican, said he is more concerned about trying to find money to keep certain education programs from being cut.
"It's just a painful process, a gut-wrenching one when it comes to determining which programs to cut and which ones to keep," said Mr. Dillard, a member of the House Appropriations Committee.
Delegate Brian J. Moran, Alexandria Democrat, said he will fight for state worker pay raises, which include teachers, college faculty and others who depend on state funding for pay increases.
He also said he would support dipping into the rainy day fund to help pay for the raises.
"Since September 11, it's been raining," Mr. Moran said.
Finance Secretary John W. Forbes told The Washington Times yesterday freezing the car-tax cut will make it easier for the Gilmore administration to put together a budget. It also means the state doesn't have to find $109 million to fund the tax cut next year, Mr. Forbes said.
"But that also means that there's $109 million that's not going to the taxpayers of Virginia," he said.
Meanwhile, Mr. Forbes told the Appropriations Committee that revenue collections grew 8.3 percent last month when compared with October 2000.
The growth equals about $64 million, $30 million of which came from September payments that were delayed in the mail because of the September 11 attacks.
After the committee meeting yesterday morning, Mr. Forbes met with Gov.-elect Mark R. Warner to discuss the state's economic downturn. Although Mr. Forbes did not get into specifics about the 90-minute meeting, he did say the two men had a "very frank discussion" about revenue and spending.
"We had an honest conversation," Mr. Forbes said. "Mr. Warner understands the magnitude of the problem. He understands that we don't have much discretion in spending as we had in good years."
Mr. Warner could not be reached for comment by The Times yesterday.
Also yesterday, the Gilmore administration postponed its plan to collect $259 million in federal Medicaid reimbursements to help balance the state budget. Under the plan, the administration asked seven localities with public nursing homes to borrow $500 million and put the money into a state account.
The state then will return the money to the localities as Medicaid payments for nursing homes. The transaction would then allow the state to ask the federal government for matching funds. The federal money would go to the state's general fund rather than being spent on patient care.
The plan was postponed because two localities Bedford County and Petersburg have refused to participate.
This story is based in part on wire service reports.


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