Local governments aren’t likely to escape the pain when the General Assembly attempts to eliminate an estimated $3.5 billion hole in the next two-year budget. That estimate does not include the losses faced by local school districts to replace federal stimulus money that will dwindle next year and then disappear entirely in the second year of the budget.

Virginia lawmakers learned today that they have a $3.5 billion hole to fill in the next two-year budget as well an estimated $209 million shortfall in the current spending plan.

Virginia and its localities should stop building more prisons and jails because a decade-long building program has led to undercrowding, a state budget analyst said yesterday. “There is no need to approve any additional prison or jail construction for the foreseeable future,“ Paul Van Lenten Jr. told members of the House Appropriations Committee and House Finance Committee.

Virginia legislators today roughed out their forthcoming investigation of the state’s troubled information technology agency and its $2.3 billion contract with Northrop Grumman. The Senate Finance Committee is turning over the inquiry to a subcommittee responsible for overseeing the nuts and bolts of government. That subcommittee is headed by Sen. Yvonne Miller, D-Norfolk. It holds its first meeting on June 29.

Lawmakers will investigate the state’s troubled information technology agency, spurred by the removal of its boss and questions about the $2.3 billion Virginia is paying Northrop Grumman for computer services. A state Senate panel that oversees government operations will conduct the inquiry and report to the Senate Finance Committee, whose chairman, Sen. Charles J. Colgan, D-Prince William, ordered the review.

The hole is even deeper than expected. The Senate Finance Committee of the Virginia General Assembly is projecting a budget shortfall of at least $3.2 billion for the 2008-10 biennial budget—an even bleaker projection than forecast previously.