- The Washington Times - Tuesday, June 16, 2009

RICHMOND | Virginia’s shaky revenues in May dived by 15.6 percent from the year before, according to a report to Gov. Tim Kaine on Monday.

That will leave a year-end hole of about $300 million the state will fill using unspent balances and federal economic-stimulus cash for the fiscal year that ends June 30, Mr. Kaine said.

The pain from months of sharp declines in tax collections will mostly be felt in fiscal 2010, which starts in July.

Because of Monday’s report, Mr. Kaine said, he will immediately begin revising the general fund forecast, on which such core services as health care, schools and public safety are budgeted.

“We will be able to manage this,” Mr. Kaine said at a news conference. His finance secretary, Ric Brown, is scheduled to deliver a deeper explanation Tuesday to the budget-writing House Appropriations Committee.

Any layoffs and further cuts necessary will come afterward, he said.

“We believe we can make ‘09 [the 2009 budget] balance without any adverse actions on the work force over the next few months,” Mr. Kaine said.

Some sacrifices are already on the books. The 2010 budget has no money to give raises to state employees.

Nor will there be tax increases, said the governor, who leaves office in January when his term expires.

“We’ve managed this with no general fund tax increase. I don’t see any proposal that I’m likely to make to change this,” he said.

Through 11 months of fiscal 2009, general fund collections are down by 9.3 percent from their levels at the same point a year earlier.

That’s two percentage points worse than the official forecast of revenues 7.3 percent below those in the last budget year.

It means that as of the end of May, the state would have to generate about $1.3 million to finish on-target, something unlikely in the sagging economy, officials said.

The last time year-to-date revenues lagged so far behind the budgeted estimate so late in the fiscal year was May 2002, when total collections were 4 percent short of their forecast.

“We have to make an adjustment to 2010,” Mr. Brown said.

Tax collections in May, a significant month for revenues, were about on track with what officials had expected, Mr. Brown said.

There was even some improvement in the tax paid to record deeds, lawsuits, wills and contracts, an indication that the housing market may be recovering.

The real damage, Mr. Brown said, came in the extraordinary demand for income-tax refunds - nearly $200 million for the month, or about one-fifth more than in May 2008.

More than half of the projected $300 million shortfall comes from a cushion of about $160 million lawmakers in February left in this year’s budget for just that possibility. About $109 million is federal stimulus money and about $50 million more is a general fund balance.

Mr. Kaine said some agencies will also have unspent balances in their budgets that will be swept into the hole. He also said he will accelerate his budget re-forecast by several months, marking the fourth time the official revenue estimate has been lowered in barely a year.

While it will make a tougher task next winter for legislators who have to reconcile the two-year 2009-10 budget and draft a new one for the 2011-12 biennium from scratch, Mr. Kaine said reductions already made will make the job easier.

“I think the worst budget we’ve seen is in the rearview mirror,” he said.

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