Kaine prepares Virginia for difficult budget cuts

By JIM NOLAN AND JEFF E. SCHAPIRO
Media General News Service
Published: August 19, 2008

Take a deep breath, Virginians. You’re in for some serious belt-tightening. Even schools and health care—spared in the last round of state budget cuts—could be squeezed.

Gov. Timothy M. Kaine said yesterday that stark economic times across the nation and reduced tax revenue in Virginia will require the state to make difficult cuts to its $77 billion budget for 2008-10.

Unlike Kaine, legislators in both parties offered projections on the growing shortfall, saying it could balloon an additional $1 billion or $1.5 billion, beyond the $2 billion gap that forced cuts earlier this year.

Kaine drew the ire of some Republicans when he was unable to specify the severity of cuts during his compulsory end-of-summer address to the Senate Finance and House Finance and Appropriations committees.

“Every month that goes by, those cuts have to be deeper,” said House Majority Leader H. Morgan Griffith, R-Salem.

The administration says it is waiting for personal-income data from the federal government. But in an acknowledgement of grim times ahead, Kaine said he had ordered aides to start work on a revised revenue forecast, which his administration would present in October.

The timetable suggests that the next cuts will be delayed until after the November election, when Kaine—a possible vice-presidential running mate to Barack Obama—hopes to tip the state Democratic.

Fellow Democrats bristle at GOP suggestions that Kaine’s management of the budget problems is driven by politics.

“Everything has to be partisan and cheap political shots,” said House Minority Leader Ward L. Armstrong, D-Henry.

. . .

The continuing cash crunch means, according to Kaine and legislators, that everything is on the chopping block—including new initiatives that Kaine fought hard to bankroll, such as mental-health reform and expanded prekindergarten.

“The need to engage in [another] round of budget reductions will mean, by necessity, that all programs—including those previously held harmless—and all available strategies will be on the table for review,” Kaine said.

Though he unsuccessfully sought new taxes for transportation upgrades, Kaine said his approach to closing the budget hole will not require Virginians to pay more.

“We will continue to manage through the national economic decline without increasing the general-fund tax burden on Virginia residents,” he said.

But Michael Cassidy, executive director of The Commonwealth Institute, a fiscal think tank, said a “balanced approach” to erasing the shortfall should include the elimination of tax breaks, including the $160 million-a-year rollback of the estate tax.

“By ignoring the revenue side, you’re taking one key option off the table,” Cassidy said.

Kaine said it is too early to specify what would be cut, and lawmakers were reluctant to put forward their ideas.

But the sagging economy could scuttle any spending initiatives Kaine might propose in the last year of his term. The governor had expressed an interest in devoting his last year to energy and the environment.

“If you’re going to put something on the plate, you’re going to have to take something off to pay for it,” said Del. Phillip A. Hamilton, R-Newport News.

. . .

The primary revenue sources most closely tied to the economy—withholding and sales taxes—are down dramatically, Kaine said.

Sales-tax collections have grown less than 1 percent in recent months. They would need to grow nearly 5 percent to reach the current forecast, Kaine said. Income-tax withholding is up just more than 1.5 percent, and it would have to grow 6.4 percent to reach earlier targets.

During the past year, the administration trimmed about $2 billion from its 2008, 2009 and 2010 spending plans, by focusing on agency nuts and bolts and aid to localities.

“The next round will be more difficult,” Kaine said.

After Kaine’s address, Republican lawmakers criticized the governor for what they said were unrealistic revenue estimates used in drafting the biennial budget.

“Frustratingly, many lawmakers—myself included—foresaw this problem last December when the Kaine administration released revenue forecasts for [fiscal year] 2010 that were exceedingly optimistic,” Speaker William J. Howell, R-Stafford, said in a statement.

“At that time, we urged the administration to offer a more realistic, conservative fiscal forecast,” Howell added.

Sen. R. Edward Houck of Spotsylvania County, the No. 2 Democrat on the Finance Committee, urged a bipartisan approach to cuts.

“It’s going to be a very painful process,” Houck said. “The summer’s over.”

Hamilton said both sides need to have an “open, honest, candid debate and discussion of the priorities of state government.”

“This is about green,” he said. “Not Republican green. Not Democratic green.” Contact Jim Nolan at (804) 649-6061 or .

Contact Jeff E. Schapiro at (804) 649-6814 or .