- The Washington Times - Monday, August 25, 2003

Gov. Mark Warner told lawmakers yesterday work still needs to be done on the state’s fiscal crisis, but the situation has improved markedly in the last 12 months.

“I am pleased to report to you that despite the worst economic conditions in well over a decade, and for the first time in three years, Virginia finished the fiscal year with a modest revenue surplus,” Mr. Warner, a Democrat, told members of the House and Senate money committees as he detailed the final numbers from fiscal 2003, which ended on June 30.

Mr. Warner reported an additional $80 million in public education funding, 45,000 new state jobs and a $1 billion bond package voters approved last fall for capital improvements to state colleges, museums and parks were all factors leading to his assessment.

“Nevertheless, it would be a serious error to think that state government has reverted to business as usual,” he said. “We still face significant challenges.”

Virginia began the new fiscal year with a $55.2 million budget surplus, a sliver of its roughly $26 billion annual budget.

About $46 million of the surplus has already been reserved for fiscal 2004 — including roughly $24 million for the Transportation Trust Fund and $11.4 million from surplus lottery sales for public education, as required by law, Mr. Warner said.

He also said decisions about the next budget will be “very difficult” because of Medicaid costs and the high cost of education, public safety, the car-tax repeal and promised salary increases for some state employees.

“The next budget will again test our ability to come together and make tough choices that will not just balance the budget, but will balance our budget in a way that makes the strategic investments that will strengthen Virginia’s future,” Mr. Warner said. “The easy solutions and even the not-so-easy solutions are gone.”

State Sen. John H. Chichester, chairman of the Senate Finance Committee, said Mr. Warner’s address was a realistic picture of what is ahead. “He was pretty much on target,” said Mr. Chichester, Fredericksburg Republican. “It’s still a pretty sobering economy that we live in.”

Mr. Warner will present his complete budget plan for the 2005-2006 biennium to the same committees in December.

Unlike last year, however, Mr. Warner, decided against ordering a reforecast of the projected revenue for the state, because the current predictions of 4.6 percent growth appear accurate.

“That’s a very good sign,” Mr. Chichester said. “There is no need to reforecast.”

Mr. Warner said increased retail sales in July and the stabilizing of unemployment claims were two of the main reasons he is optimistic about the fiscal year.

However, he said those figures must stay constant for the fiscal 2004 budget to remain balanced.

Last year, Mr. Warner was forced to cut nearly $6 billion from the state budget, including terminating 4,900 state jobs. Higher education and the Department of Motor Vehicles were hit hardest by three separate rounds of budget cuts.

At one point, 12 DMV branches were shut down and all Virginia DMV offices were closed on Wednesdays.

“Given news like last year’s, it’s nothing short of a miracle that you invited me back this year,” said Mr. Warner, joking with lawmakers at the beginning of his address.

The DMV offices have since been reopened, and office hours have been restored. However, Virginia’s colleges and universities have had to increase tuition to offset some of the cuts.

When Maryland was faced with a $1.7 billion shortfall last year, Gov. Robert L. Ehrlich Jr. also borrowed money from the Transportation Trust Fund. With roughly $300 million from the fund, Mr. Ehrlich still needed to delay other transportation projects, eliminate 950 vacant jobs and increase property taxes to balance the roughly $22.2 billion budget.

However, he did not increase taxes on income, cigarettes or liquor, and vetoed a proposed corporate-tax package.

To reduce an expected $1 billion shortfall in the fiscal 2005 budget, Mr. Ehrlich and the Board of Public Works met in July to cut $208 million.

The governor eliminated 82 state jobs, cut almost $90 million for the Department of Health and Mental Hygiene, $40 million from the University of Maryland System and $11 million from the state’s Department of Human Resources. He also cut more than $18.8 million in state funding to counties.

To help offset the budget shortfalls the states are facing, the federal government has agreed to allocate nearly $20 billion.

Mr. Warner said Virginia is expected to get $400 million, but the money would be set aside for future needs.

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