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Time for state cutbacks . . . Date published: 9/28/2008
WHEN THE FIGURE "$700 billion" is being thrown around, $2.9 billion doesn't sound so bad. That's the figure Richmond is putting on the state's potential shortfall. And though it may look like peanuts, it's not. Unlike the U.S. Constitution, Virginia's founding document requires the state to balance its budget. While "we can't afford it" is considered speaking in tongues in Washington, it's doctrine in Richmond. So when fuel prices rise, health-care costs skyrocket, sales-tax revenues drop, and investments depreciate, the state has to cut back. Gov. Kaine asked state agencies to prepare scenarios by Friday for 5 percent, 10 percent, and 15 percent reductions in their budgets. Attorney General Bob McDonnell has already announced he's cutting back his office expenses by 9.1 percent. He has also turned in his state car and given himself a 2 percent salary cut. Further state cutbacks, which should be announced in mid-October, could include reduction of services, layoffs, and other belt-tightening measures. Expect to be affected. Everyone will be. These are hard times. Revenue from sales and income taxes, which fund 80 percent of the state budget, are less than projected. Recordation taxes (deed transfers, for example) have fallen off 33 percent since 2007. Those taxes, however, provide a window into the systemic problems in the nation's economy. In 2000, recordation taxes brought in $151 million. By 2005, that number was nearly $705 million. Why? Because low-interest home loans fueled a boom in housing sales--the same loans that helped contribute to the current malaise. The real-estate bubble burst in 2007, dropping recordation taxes to $532 million. That number will fall again this year. The good news is that Virginia has long been known as one of the nation's best-managed states. And Forbes magazine put the Old Dominion atop its list for "best business climate" for the third year in a row in August. We will get through this, but the going will be painful. The Virginia Constitution notes that "of all the various modes and forms of government, that is best which is capable of producing the greatest degree of happiness and safety." Now is the time to review what state programs fit those guidelines, and put the rest on hold. That will be Mr. Kaine's mission--and the General Assembly's--next year.
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