- The Washington Times - Wednesday, September 17, 2008

RICHMOND | Virginia’s revenues continued falling in August as year-to-date collections dipped below the previous year’s comparable total for the first time in nearly six years.

Two months into the current budget, total general fund receipts excluding lottery profits totaled almost $2.19 billion, according to the monthly revenue summary Finance Secretary Richard D. Brown has released.

That’s a loss of 1.9 percent from $2.23 billion at the same point in 2007. The current budget is based on forecasts that annual collections grow by at least 2 percent, not decline by nearly the same amount.

The last time year-to-date collections fell was November 2002, when general fund receipts were 0.6 percent below what they had been at the same point the previous fiscal year.

The gloomy news comes after Gov. Tim Kaine, a Democrat, announced plans to slash state spending and as he huddles with economic advisers to determine how deep the cuts will be.

For months, the administration has watched with alarm as the souring national economy, soaring fuel prices and stagnant home sales resulting from the subprime mortgage lending crisis have eaten into general fund revenues. The general fund pays for some of government’s most basic duties, including law enforcement, public education and health care.

Mr. Kaine has asked directors of state agencies to submit contingencies by Sept. 26 for cutting their operating costs by 5 percent, by 10 percent and by 15 percent. Mr. Kaine will review the plans and make his targeted cuts by mid-October.

From 2001 through 2003, a faltering economy damaged by the Sept. 11, 2001, attacks left state general fund receipts far behind budgeted spending. Before the crisis ended, the state had to reconcile shortfalls that totaled nearly $6 billion.

In his latest summary to Mr. Kaine, Mr. Brown wrote that August’s revenue collections were down 6.6 percent from August 2007. At least part of the decrease results from two fewer business days to deposit receipts this August, he wrote.

That was especially true, he said, for state income taxes withheld from paychecks, which accounts for nearly three-fifths of the general fund. While August was down by 3.8 percent over the same month in 2007, income tax withholding collections two months into the fiscal year were up 5.1 percent, still short of the budgeted forecast of 6.4 percent growth.

Sales taxes, which reflect July retail activity, increased by 2.2 percent, but for the year to date are 1.1 percent below the same point last year. The state budget presumes a 4.9 percent rate of annual growth in sales taxes.

August brought another sharp drop in the tax paid to record real estate deeds, contracts, lawsuits and wills - further evidence of lingering distress in the real estate industry from the mortgage crisis.

Revenue produced by the “recordation tax” is down for the fiscal year by 34 percent, about double the 16.6 percent anticipated in the yearly budget that took effect in July.

Low-interest home loans fueled a boom in housing sales and refinancing that boosted annual recordation tax collections from $151 million in calendar year 2000 to nearly $705 million in calendar 2005. Since then, collections slid to $616 million in 2006 and $532 million in 2007.

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