- Associated Press - Monday, May 19, 2014

RICHMOND, Va. (AP) - An unexpected revenue shortfall added a new sense of urgency Monday to a long running budget impasse that could shutdown state government. But lawmakers showed no sign that urgency was bringing them closer to an agreement.

Gov. Terry McAuliffe met with key lawmakers at the Capitol to tell them about lower-than-expected tax collections, particularly from capital gains, could leave a $300 million budget hole for the current fiscal year that ends in June.

McAuliffe told reporters after the meeting that the new budget gap shows the need for a quick compromise on passing a state budget for the next two fiscal years.

Republican and Democrats haven’t been able to pass a roughly $96 billion biennial budget for several weeks because of disagreements over whether to expand Medicaid eligibility to as many as 400,000 low income residents. McAuliffe and most Democrats favor expanding eligibility, most Republicans do not.

Republicans said Monday they’ve always had a sense of urgency about passing a state budget. But they said the projected shortfall bolsters their case for passing a budget without Medicaid expansion, saying more reforms of current Medicaid spending are needed first.

The two camps were also at odds about the potential impact of the $300 million gap. McAuliffe said it was too early to tell what the impact might be, while House Appropriations Chairman S. Chris Jones, R-Suffolk, also said the new budget projections make raises for state employees unlikely and said some state programs will probably have to be cut.

McAuliffe and Republicans also continued to disagree over whether the governor has the authority to spend state money if no budget is passed by June 30th - something that’s unprecedented in the state’s history.

Lawyers for the General Assembly’s Division of Legislative Services said at a hearing that McAuliffe’s spending powers would be severely limited in the absence of a budget.

But the governor reiterated his position that he will be able to keep state government running.

“This government is never going to shut down,” McAuliffe said. “We’re going to continue to function.”

Jones said the governor hasn’t provided any details about what authority he’d have to spend absent a budget.

“Obviously someone’s confused,” Jones said.

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