Thursday, August 06, 2009
Kaine: Shortfall may prompt more cuts
Virginia's revenue shortfall could climb as high as $1.5 billion for the current fiscal year.
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From The Roanoke Times
RICHMOND -- Gov. Tim Kaine said Wednesday that Virginia may face a revenue shortfall as great as $1.5 billion in the current fiscal year, signaling the severity of the budget cuts his administration will implement in the coming weeks.
Kaine delivered the news after meeting for more than two hours with his advisory council on revenue estimates, a group that includes senior state lawmakers, business leaders and economic advisers. With Virginia still suffering the effects of a national recession, the group discussed reducing revenue projections by $700 million to $1.5 billion for the fiscal year that ends June 30, 2010, Kaine said.
Kaine already has asked state agencies to prepare budget-cutting scenarios ranging from 5 percent to 15 percent. The governor will release a new revenue forecast and outline his plan for balancing the budget in an Aug. 19 presentation to the General Assembly's money committees. Kaine said plans proposed by some agencies call for layoffs and acknowledged that his budget-balancing plan could eliminate more state jobs.
"That's certainly a possibility," Kaine told reporters.
The General Assembly earlier this year revised the state's two-year, $77 billion budget to account for a cumulative revenue shortfall of about $3.7 billion. The shortfall affects the general fund portion of the budget, which now stands at $31.8 billion for two years.
Federal funds from the economic recovery package enabled lawmakers to avert about $700 million in cuts that Kaine proposed in a budget plan he introduced in December. Kaine said some of those cuts could be reconsidered as he crafts a plan to balance the budget.
Kaine said he will provide lawmakers with a broad outline of his proposed budget cuts later this month and have a detailed plan in place by Labor Day.
Kaine said business leaders who attended the session pointed to some hopeful economic signs such as improvements in housing and construction activity. But Kaine said those signs are "not yet trends."
"They're not talking about a rocket-fueled acceleration of the economy, but they are talking about a pickup," Kaine said.
House Majority Leader Morgan Griffith, R-Salem, said most of the legislators in the meeting were more pessimistic.
"Basically the legislators felt that, based on what we're hearing in our communities, consumer confidence is not going to return in the next month," Griffith said. "It's going to take several months of really good news before that happens. And based on that, we don't feel it's time to be adopting the rosier picture, but we should be adopting the less rosy picture."
Kaine said he will "really wrestle" with the information he received Wednesday before settling on a new revenue target.
Kaine described Virginia's fiscal crisis as the worst since the 1930s, but he noted that the state is in better shape than many of its peers. But general fund tax collections dropped 9 percent in the fiscal year that ended last month, leaving the state with less revenue that it collected in the 2006 fiscal year, when Kaine took office.
The spillover effects of the recession will pose challenges as Kaine puts together a budget for the two-year period that begins July 1, 2010. Federal stimulus funds also will expire during the next budget cycle, leaving difficult decisions for lawmakers and Kaine's successor, who will take office in January.
"It's going to take robust growth for us not to have a significant problem next winter," Griffith said. "I don't think any of us see that coming."
Kaine said he intends to leave his successor with a budget that has the state poised to benefit from an economic rebound.
"I have no doubt that during the next biennium they're going to see the economy taking off and I will have made the hard decisions and hopefully convinced the legislature to go along with them," Kaine said.
