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RICHMOND -- Gov. Tim Kaine on Thursday ordered deep spending cuts and employee layoffs and proposed tapping Virginia's "rainy day" fund in response to the state's worst revenue shortage in six years.

Kaine called for nearly $350 million in new spending cuts, with 567 state workers losing their jobs and others going without pay raises until at least the middle of next year. Kaine reduced state funding for public colleges by as much as 7 percent, cut administrative spending for health and human services and ordered the closing of several low- to medium-security correctional facilities, including the Pulaski Correctional Center.

The governor also proposed withdrawing $400 million from the rainy day fund and using debt rather than cash to finance $250 million worth of state construction projects.

Kaine's actions -- which add to more than $1 billion in cuts and savings -- are initial steps toward resolving a $2.5 billion shortfall in Virginia's two-year, $77 billion budget.

The cuts apply to the fiscal year that ends June 30, leaving what the governor described as a "significant" shortfall in the second year of the budget cycle. Kaine will outline the rest of his plan for balancing the budget in December. That plan is expected to include additional layoffs, Kaine said.

Kaine tied the state's budget woes to a national economic slump that has weakened growth in state sales and income tax collections, two major sources of revenue in Virginia's general fund.

Kaine's administration expects total general fund revenue to decrease by 4 percent in this fiscal year and grow by 3.6 percent next year. But Kaine said general fund tax collections in the 2010 fiscal year still are expected to be less than what the state received in the 2008 fiscal year, underscoring the severity of the problem.

"Businesses are hurting and they're making less money; citizens are hurting and they're making less money," a somber Kaine said during a news conference in his Cabinet meeting room. "When they make less money, they pay less taxes. And they have to make very difficult decisions, either around a kitchen table or around an office about what to cut. Government has to do the same thing."

Kaine did not cut funds for the state's public school systems Thursday, but said education spending could be trimmed in the next fiscal year. He made cuts in health and human services programs, but said they would not affect the expansion of community-based mental health services approved earlier this year by the General Assembly.

Under Kaine's plan, the Virginia State Police will postpone its next basic trooper school until April and will freeze vacancies in the Department of Forensic Science. Representatives of the two agencies said the budget cuts will not lead to a reduction in services.

Local governments were still assessing the possible effects of the cuts Thursday, but many officials expect the state's budget woes to affect aid to localities.

Kaine's budget moves drew little criticism from lawmakers Thursday, but some Republicans questioned the administration's revenue projections. The Virginia Department of Taxation last month issued a report projecting a revenue shortfall of $2 billion to $2.9 billion for the two-year budget cycle, depending upon economic activity. Kaine's administration pegged the shortfall at $2.5 billion, anticipating some revenue growth in the next fiscal year.

Some Republicans said Kaine should have been more conservative because of the economic slump.

"We have to be cautious in our revenue estimates," said House Majority Leader Morgan Griffith, R-Salem.

Griffith raised concerns about some of Kaine's budget cuts, including the elimination of a psychologist position from a sex-offender treatment program and a reduction of support positions for drug court programs. But he acknowledged that the fiscal crisis puts Kaine in a difficult position.

"I think the governor's having to do a tough job," Griffith said.

House Minority Leader Ward Armstrong, D-Henry County, gave Kaine high marks despite the fact the governor's budget ax fell on the Virginia Museum of Natural History in Martinsville. The museum will close on Sundays and Mondays and lay off four employees.

But state workers may have a hard time finding a silver lining in the gloomy picture that Kaine painted Thursday. In addition to layoffs, Kaine eliminated more than 800 unfilled positions and postponed 2 percent pay raises that workers were supposed to get in November. Kaine said the raises will take effect in July, but cautioned that ongoing budget problems could jeopardize the salary increases.

"State employees are watching nearly 600 of their friends and colleagues walk out the door, knowing that they will be expected to pick up the slack so that Virginia can still be considered one of the best managed states in the country," said Bill Elwood, the executive director of the Virginia Governmental Employees Association. "They will be expected to do so after a meager 2 percent raise was snatched from them at the last minute, a raise that was supposed to cover the cost of increased health insurance premiums that went into effect in July."

Kaine lamented the layoffs and said he has directed the Virginia Employment Commission and the state's human resources department to assist workers who will lose their jobs.

Staff writers Mike Allen, Amanda Codispoti, Courtney Cutright, Pete Dybdahl and Laurence Hammack contributed to this report.