Kaine calls for further state budget cuts

Virginia's budget belt needs to be pulled a little tighter.

Gov. Timothy M. Kaine said yesterday that the ongoing recession will force even deeper cuts in state spending in the coming months.

Kaine said he has instructed the heads of all state agencies to reduce spending further, because revenues for April, May and June are expected to fall below estimates upon which the budget for fiscal 2009 was based.

That means the state could fall up to $225 million short of the revenue it needs to balance Virginia's budget through the fiscal year that ends June 30.

"The numbers continue to show challenges in the Virginia economy," said Kaine, speaking to reporters at the state Capitol.

Unlike previous belt-cinching directives to state agencies during the budget cycle, Kaine said he did not set a specific percentage on the reduction and has not given instructions to lay off more workers.

But he said current economic trends suggest the forecast 7.3 percent reduction in revenue used to calculate the budget for this fiscal year could end up being closer to 8.5 to 8.8 percent.

That would leave the state up to $225 million short. Under the Virginia Constitution, the budget must be balanced at the end of each fiscal year.

"If there is any way [state agencies] can underspend between now and the beginning of the year, that would be great," Kaine said. "I'm telling them that they need to be austere."

Mitigating the deficit is $160 million in unallocated funding left in the fiscal 2010 budget -- money Kaine would apply to the current shortfall if spending reductions do not produce necessary savings.

"That gives us a little bit of a cushion," said the governor, who said he expects to ask department heads to provide additional reduction plans as he begins to prepare the budget for fiscal 2011 and 2012.

Kaine said May is a critical month for revenue forecasts, because May 1 is the deadline for filing state income taxes.

Secretary of Finance Richard D. Brown said the state has paid out more in income-tax refunds this year, while the numbers from April continue to show declines in revenue generated from sales taxes, income taxes and taxes on investments.

According to The Associated Press, April will be the ninth consecutive month in which Virginia tax revenues are below what they were during the same month last year, surpassing an eight-month stretch during the last recession, from January 2002 to August 2002.

Kaine, who briefed Virginia legislative leaders on the state's financial picture last week, said the economy is showing some signs of recovery, such as the increase in home sales.

But he said he ordered more spending reductions rather than waiting until the end of the month, given the assumption that the national recession, which began in December 2007, is not at an end.

"Frankly, I bet we'll see a couple more months of it," he said.

Contact Jim Nolan at (804) 649-6061 or .