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Wednesday, September 03, 2008

Kaine orders state agencies to address shortfall

The governor has said that nothing is off the table, including public education.

Gov. Tim Kaine has asked executive branch agencies to prepare contingency budget reduction plans ranging from 5 percent to 15 percent, another sign of the possible severity of Virginia's revenue shortfall.

The governor's order comes two weeks after he told the General Assembly's money committees that weaker-than-expected revenue growth likely will force deep cuts to Virginia's two-year, $77 billion budget. Lawmakers in both parties have said they expect a shortfall of about $1 billion. Kaine said he won't put a number on the deficit until his administration produces a new revenue forecast next month.

But a memorandum issued Tuesday by Kaine's chief of staff, Wayne Turnage, painted a bleak picture.

"I know this is not the kind of news that you were hoping to receive this fall about the budget," Turnage wrote in the memo, which the governor's office released late Tuesday afternoon.

"Over the last year, you worked through the difficult process of reducing spending to address revenue declines that total nearly $2 billion over the three fiscal year period of 2008, 2009, and 2010," Turnage wrote. "As we start this next round of cuts, it is clear that the choices will be even more difficult."

Kaine has asked state agencies to prepare spending reduction plans of 5 percent, 10 percent and 15 percent for this year and next year, and to focus on targeted cuts rather than across-the-board reductions.

Those plans would be considered after the administration prepares a new revenue forecast, likely in October.

Kaine can cut general fund spending up to 15 percent on his own, but deeper cuts would require legislative approval.

He said last month that all state programs, including public education, could face spending reductions because of the shortfall. Kaine hopes to work with state colleges to keep spending cuts from driving up tuition costs, spokesman Gordon Hickey said.

Kaine's administration has raised concerns about sales and income tax collections, which slowed considerably in the second half of the fiscal year that ended June 30. Those taxes are key sources of revenue in the state's general fund, which is expected to total $34.6 billion for the two-year period that ends June 30, 2010.

Republican lawmakers have argued that Kaine's administration has been too slow to get a handle on the budget problems. House Majority Leader Morgan Griffith, R-Salem, said Tuesday that he was pleased Kaine had asked agencies to prepare spending reduction plans, but said the governor should have made the move a month ago.

"He was out campaigning instead," Griffith said, referring to Kaine's involvement in Democrat Barack Obama's presidential campaign.

Hickey said issuing the order last month "would not have made any difference" because the new revenue forecast won't be ready until October.

Kaine's order to state agencies is similar to one issued by his predecessor, Democrat Mark Warner, when the state faced severe budget shortfalls in 2002. At the time, Republican lawmakers complained that Warner's administration did not share complete information about the proposed spending reduction plans.

Griffith said he hopes Kaine "will share information with the legislature as opposed to keeping us in the dark."

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