RICHMOND -- Gov. Tim Kaine's administration has imposed spending and hiring restrictions on state agencies and raised the possibility of layoffs as it braces for more budget problems caused by a slumping economy.

Virginia closed the fiscal year June 30 with a slight surplus, but Kaine's administration reported Thursday that a slowing economy will force "significant downward adjustments" to revenue projections in the current two-year budget. Kaine ordered limits on discretionary spending and employee hiring, and his chief of staff asked cabinet secretaries "to critically assess the need for current wage employees to ensure that their continued employment is mission critical."

The hiring restrictions won't apply to state colleges or positions in public safety, health and natural resources.

"While the exact magnitude of the revenue gap for the next biennium is uncertain at this time, it may be significant based on our preliminary analyses," wrote Wayne Turnage, Kaine's chief of staff, in a Wednesday memo to the heads of executive branch agencies.

The preliminary review indicates that key general fund revenues will not grow as expected in the fiscal year that began July 1, consistent with a nationwide trend. Kaine, who is in Europe this week on a state marketing and trade mission, will provide a detailed revenue briefing to the General Assembly's money committees next month.

In a Thursday letter to Kaine, Secretary of Finance Jody Wagner said the state closed the last fiscal year with a general fund surplus of about $5.4 million, within 0.03 percentage points of the official revenue forecast. The official forecast reflects adjustments that Kaine and lawmakers made during the winter to account for slower-than-expected revenue growth.

Kaine and lawmakers cut spending and dipped into the state's "rainy day" reserve fund to balance the budget that expired last month. The General Assembly also trimmed $1 billion from Kaine's $78 billion budget proposal for the current two-year cycle.

Wagner noted that individual income taxes and retail sales taxes -- the two state revenue sources most closely tied to economic growth -- had a "meaningful slowdown" during the second half of the last fiscal year. Because of that, she said in her letter, "significant downward adjustments to the revenue forecast" should be expected this fall.

Del. Lacey Putney, I-Bedford, the chairman of the House Appropriations Committee, said he was "not surprised at all" by the news, considering ongoing problems in the national economy.

Putney and other House budget writers called for conservative revenue estimates during the winter as they worked on the new budget. Kaine adjusted the revenue forecast in February and scaled back some of his spending proposals because of slow growth.

But, Putney said, "I can tell you that some of us were not 100 percent comfortable with the figures that we based the budget on.

"I think we should always be prepared to err on the side of caution," Putney said.

The spending and hiring restrictions imposed by Kaine are similar to those he ordered in February in response to a bleak revenue outlook. With some exceptions, the hiring of salaried or wage employees will require approval from the supervising cabinet secretary.

Agencies also face restrictions on training and travel and are prohibited from making discretionary purchases of equipment, software and similar items.

Kaine and state budget officials are reviewing 1.5 percent spending reduction plans that Cabinet secretaries submitted last month. Turnage advised agency heads to begin implementing those plans "and consider them as targeted reductions."