- The Washington Times - Friday, February 1, 2008

RICHMOND — A receding economy that continues to eat into the state”s tax collections will force Gov. Tim Kaine to recommend more budget tightening.

Mr. Kaine yesterday said on his monthly statewide show on WRVA radio in Richmond and the Virginia News Network that revenues continue to lag behind expectations, even after the revenue forecast was lowered last fall.

“We had taken the forecast down in August, and in November, we had basically left it where it was,” said Mr. Kaine, a Democrat. “It looks pretty likely I”m going to come back to the House within the next two weeks and recommend an additional downward reduction.”

House Republicans, however, criticized the Democratic governor in floor speeches, accusing him of withholding details that legislative budget writers need to finish their first-draft budgets by Feb. 17.

“I guess the question I have is where is the governor and what is he doing,” asked Delegate Clarke N. Hogan, Halifax Republican and a member of the House Appropriations Committee.

“We were told yesterday we might start to get some specifics about February 12. We were told that the numbers can”t be ready until then. I think anyone could have told you months and months ago we are going to have revenue problems,” he said.

House Minority Leader Ward L. Armstrong said a sound forecast requires complete revenue data not even available until today, the start of a new month.

“You do not want to release revenue estimates until you are sure what the data is,” said Mr. Armstrong, Henry Democrat. “We all know that the economy is cooling off and that the news is not going to be good. But for the governor to issue revenue estimates in a report that are not as accurate as they can be is irresponsible.”

Economic forecasts on which state budgets are based are formed by the administration after consulting with a board of economic advisers.

In October, Mr. Kaine ordered about $300 million in cuts to state spending that are already reflected in his amendments to the current budget, which expires June 30.

“The next round will be harder,” Mr. Kaine said. “There will be some pain involved, as there always is, but this is what businesses and families do.”

In January, Finance Secretary Jody Wagner warned that revenues from three substantial sources came in well below their budgeted targets in December. They included sharp drops from the previous December in collections of the non-withholding tax paid by the self-employed and on stock dividends; on the tax paid to record wills, lawsuits, contracts and real estate deeds; and corporate taxes.

Alarming downturns in the stock market and continued troubles in the real estate and home mortgage industries prompted an alarmed Federal Reserve to lower its prime lending rate twice in the past two weeks.

A reduction in the revenue estimate is likely to mean further cuts in state spending and a more austere budget than the $78 billion blueprint for state spending that Mr. Kaine submitted for 2008 through mid-2010. Mr. Kaine also said it could mean that government will dip into its $1.2 billion rainy-day money reserves even more deeply than expected.

“It”s all by formula. You are allowed to withdraw, but you are not required to withdraw,” Mr. Kaine said.

In the budget that Mr. Kaine submitted in December, he proposed using about $260 million to ease an expected $640 million shortfall this year.

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