Just weeks away from presenting his first two-year budget to lawmakers, Gov. Bob McDonnell emerged Tuesday from a closed-door meeting with legislators and business leaders and indicated that another round of "conservative budgeting" is ahead.
McDonnell said there was a "reasonably broad embrace" by economic advisers for a forecast showing continued revenue growth over the next two years, but that "there's still some degree of pessimism based on the sheer uncertainty of what's going on both in Washington and in the world."
Tuesday's conversation with members of the Governor's Advisory Council on Revenue Estimates will inform the two-year budget proposal that McDonnell will present to lawmakers Dec. 19.
"There was a sense of caution, and that's what we've tried to embody over the last couple of years. We've tried to keep revenue estimates conservative," Lt. Gov. Bill Bolling said after the meeting. "That's helped us produce budget surpluses as opposed to getting carried away with the revenue numbers and then end up with budget shortfalls."
A preliminary state estimate anticipates revenues growing 3.7 percent in fiscal 2012, at 3.3 percent in 2013 and 4.6 percent in 2014, according to the governor's office. McDonnell could use those assumptions or revise them.
House Appropriations Committee staff director Robert P. Vaughn told members of the House of Delegates' money committees last week that the state could face a roughly $1 billion budget gap over the next two years.
Vaughn told members at a two-day retreat in Staunton that there could be a shortfall of between $885 million and $1.5 billion for the 2013-14 biennium in part because of cost drivers including Medicaid, updated K-12 school costs and state pension contribution rates.
McDonnell told reporters Tuesday that Virginians can expect "ongoing conservative budgeting." He said he's "not looking at any major layoffs per se," but that there could be staff reductions as a result of agency consolidation.
"We're going to continue to look for ways to reform and improve the way we deliver services in state government," he said. "People should expect some reductions in spending in certain areas of the government."
McDonnell had asked agencies to propose spending reductions equal to 2, 4 and 6 percent of their general fund appropriations, and he's reviewing the submissions.
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