- The Washington Times - Tuesday, August 20, 2002

RICHMOND Gov. Mark R. Warner reduced the state's general fund revenue forecast yesterday by nearly $1.3 billion, reflecting the damage to Virginia's economy from a swooning stock market and related layoffs.
Mr. Warner took action in anticipation of a budget shortfall that he said will substantially exceed $1.5 billion for the two-year period that runs through June 2004. The move will force state agencies to pare their budgets by as much as 23 percent and will likely entail layoffs.
"Make no mistake. Some institutions and agencies will close. Some funding streams may disappear. And there will be more layoffs," Mr. Warner told members of the House and Senate budget-writing committees who sat in stunned silence.
Yesterday's projection that the revenues will fall at least another $1.5 billion from their forecasts comes in addition to the $3.8 billion in cuts that Mr. Warner and the General Assembly made in February to balance last year's budget and put together a new two-year spending plan.
"In plain English, this latest shortfall means that there is no general fund revenue to support $1.5 billion of the nearly $25 billion in general fund spending which was appropriated in the biennial budget," Mr. Warner, a Democrat, told legislators.
"Since January, we have now faced a budget problem equal to $750 for each and every man, woman and child in the commonwealth of Virginia a total of $5.3 billion," Mr. Warner said.
Mr. Warner said he has told state agency heads to prepare three separate budget-cutting plans for fiscal years 2003 and 2004 to reflect cuts totaling 7 percent, 11 percent and 15 percent by Sept. 20. The cuts would be in addition to cuts of 7 percent and 8 percent already put in place for most agencies.
"The reductions we implement will not levy the same percentage cut for each agency. That's why I am asking for multiple plans from each agency," Mr. Warner said.
Some savings will come from eliminating redundant agencies and functions identified by the administration, legislators and a 13-member panel on government streamlining headed by former Gov. L. Douglas Wilder.
Mr. Warner said he will immediately impose monthly spending limits on all agencies while the administration develops a permanent plan to deal with the shortfall. Putting state agencies temporarily on an allowance will bring spending for such needs as travel, equipment and other costs to a minimum.
Spending limits for the state's colleges and universities will be set quarterly, the governor said.
The governor also said the cuts will apply to some areas of the budget not funded through the general operating fund, including health care, higher education and aid to the indigent and disabled. He included exemptions for nongeneral appropriations such as highway construction, maintenance and mass transit; unemployment compensation; and tuition, fees and sponsored programs for higher education.
Mr. Warner's speech left legislative budget writers hardened by more than a year of gloomy fiscal news.
"Once you use up all the creative solutions and the rainy-day funds, then you get into real cuts affecting real people," said state Sen. Walter A. Stosch, a Henrico Republican who is an accountant by profession and a member of the Senate Finance Committee.
What neither Mr. Warner nor legislators of either party were ready to consider were taxes, including a possible boost to Virginia's lowest-in-the-nation 2 cents-per-pack tax on cigarettes.
"I don't see any taxes being raised in a recessionary situation. I don't think that will even be a topic of discussion. I don't think you want to do that when there is high unemployment, when office space in Northern Virginia goes unoccupied," said Sen. John H. Chichester, Stafford Republican and chairman of the Senate Finance Committee.
House Democratic Leader Franklin P. Hall of Richmond agreed that there was no legislative appetite for increasing taxes, even the so-called "sin taxes" on tobacco and alcoholic beverages.
Mr. Warner said he had no plans to reverse former Gov. James S. Gilmore III's car-tax rollback. The final 30 percent of the tax was to have been phased out this year but has been put on hold.
The budget crisis also further complicates efforts to bring Major League Baseball to the commonwealth and support for a new stadium.
The Virginia Baseball Stadium Authority and a bid group led by telecommunications executive William Collins has yet to find full backing of roughly $200 million in stadium authority bonds for a new ballpark.

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