Tuesday, August 19, 2008

Virginia Gov. Tim Kaine warned state lawmakers on Monday that no area of government is safe from an upcoming round of major budget cuts made necessary by the slumping national economy and slowing state tax collections.

“The need to engage in a third major round of budget reductions will mean, by necessity, that all programs - including those previously held harmless - and all available strategies will be on the table for review,” Mr. Kaine, a Democrat, told a joint meeting of the Senate Finance, House Finance and House Appropriations committees.

The cuts follow a downturn in predicted revenues on which the current budget, which took effect July 1, was based.

Mr. Kaine said sales-tax collections grew at an average rate of only 0.8 percent in the last four months of the fiscal year and would have to grow at 4.9 percent to make the forecast for fiscal 2009.

In addition, he said, slumping income-tax withholdings and transportation revenues related to vehicle-sales and gas taxes have contributed to the economic downturn, along with a struggling housing market and increasing unemployment.

The governor said officials will immediately begin to revise revenue projections before making the next round of cuts. Kaine spokesman Gordon Hickey said officials hope to have the forecasts complete by the beginning of October.

Mr. Kaine mentioned the public education system as an area previously untouched by budget reductions, but said, “The need for tough decisions will require examination of all areas of state spending.”

“The task that lies before us will not be easy,” Mr. Kaine said. “The cuts we have made over the last year - cuts based on solid data and careful prioritization - have been tough. The next round will be more difficult.”

Lawmakers already were forced to cut roughly $2 billion from the state budget in March because of what Mr. Kaine called a “challenging revenue situation.” And the governor last month ordered agencies to curb hiring, travel and purchases after learning the state barely finished ahead of expenses for the budget year that ended June 30.

Out of a total general fund budget of roughly $17 billion for the 12 months that ended June 30, the state finished with just $6.5 million to spare - a cushion of roughly 0.04 percent, Mr. Kaine said Monday.

House Speaker William J. Howell said after the governor’s remarks that the new downward revisions in the revenue forecast can be blamed on “inaccurate revenue forecasting” by Mr. Kaine’s administration.

He said that the administration released “exceedingly optimistic” revenue forecasts for fiscal 2010 in December and that the governor then proposed new state spending instead of offering a more conservative fiscal forecast.

“This combination caused many of us to have genuine concerns about the overall soundness of the governor’s spending plan and, therefore, the long-term structural integrity of the state budget,” said Mr. Howell, Stafford Republican, who said the state’s budget shortfall could total $1 billion. “Today’s comments by the governor demonstrated that our earlier concerns were well-founded.”

Delegate Albert C. Pollard, Lancaster Democrat, asked whether the undetermined amount of the shortfall would be so deep that a remedy would be outside the governor’s legal authority. If so, he reasoned, lawmakers should be told soon whether to hold a second special General Assembly session in 2008.

Lt. Gov. Bill Bolling, a Republican running for re-election next year, said he fears that Mr. Kaine’s actions are “too little, too late” and was concerned that the governor did not provide a specific plan of action to address the issue.

“While he has announced approximately $49 million in spending reductions to date, these reductions pale in comparison to the massive shortfalls we face,” Mr. Bolling said. “We need to act as quickly as possible to adopt a plan for making the necessary adjustments to address these shortfalls now.”

Mr. Hickey said the prior projected revenues were the result of a “consensus forecast” approved by leaders of both parties in the House and Senate.

“There’s no point in laying blame, but it’d be nice if the Republicans, instead of looking for someone to blame, would focus on taking care of Virginia’s needs,” he said.

cThis article is based in part on wire service reports.

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