Virginia budget outlook poor; shortfall could grow

RICHMOND, Va. -- The bad economy will result in another $250 million to $300 million budget shortfall for the fiscal year ending June 30, House of Delegates money committees were told yesterday.

This would be on top of the $1.3 billion revenue shortage predicted in August and bring total revenues down from earlier forecasts by more than $6 billion since March 2007.

Grim state budget writers heard the bad news at a retreat at the General Assembly Building and then began pondering what state programs to cut.

Del. Lacey E. Putney, I-Bedford, chairman of the House Appropriations Committee, made it clear that he would not tolerate a tax increase. That "would just further burden the consumers during this economic downturn," he said.

Putney said he wants members of the House to propose reducing or eliminating specific programs.

"What I don't want is generalized statements of cutting waste and eliminating inefficiency," he said. "Neither of those is a line item in the state budget."

And, if members come to the budget committee with a proposal to increase spending, they must propose a corresponding amendment to reduce spending, Putney said.

The retreat -- a two-day, numbers-crunching budget review by the House Appropriations Committee -- usually is held out of town, in a member's district. It was held in Richmond in a state building to save rental fees, committee director Robert P. Vaughn said. Members of the House Finance Committee also attended.

Total state revenues fell 8 percent in October compared with the October 2008 total, a memorandum by state Secretary of Finance Richard D. Brown said. In the first four months of this fiscal year, which began in July, they are down 7.6 percent.

Asked by Del. Joe T. May, R-Loudoun, whether the budget writers should feel "glad, sad, cautiously optimistic or cautiously pessimistic," Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, answered "all of the above."

The reduced revenues will be in the 2010 fiscal year, which ends June 30.

The General Assembly will have to deal with that budget situation when it returns to Richmond in January but also must adopt a budget for the fiscal years 2011 and 2012.

Gov. Timothy M. Kaine will propose the two-year budget shortly before he leaves office. Kaine took steps in August to make budget cuts because of the $1.3 billion shortage at that time.

Vaughn projected a 3.8 percent growth in general-fund revenues in fiscal 2011 and a 5.3 percent growth in fiscal 2012. These are well below historic growth rates.

Budget-reduction strategies suggested by Vaughn include across-the-board cuts of 15 percent at state agencies. Kaine reduced some, but not all, state agencies by 10 percent in August. In public safety, a 15 percent cut would involve cutting 140 state troopers and 1,300 prison beds. In health and human resources, this would reduce local services to 5,834 mentally disabled clients and reduce 426 direct care staff at mental health hospitals, he said.

Vaughn warned that the task before the budget writers will not be easy.

"All low-hanging fruit has been picked," he said.

Two budget committee members suggested possible unpicked fruit.

Del. Clarence E. Phillips, D-Dickenson, said the General Assembly should meet 45 days rather than its scheduled 60 days to save money. Del. Algie T. Howell Jr., D-Norfolk, said school systems could save gas money by not letting their buses idle while waiting to take home children from school.

Contact Tyler Whitley at (804) 649-6780 or .