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Virginia Gov. Tim Kaine previously said he would dip |
BY CHELYEN DAVIS
State Senate budget-writers say the state's budget shortfall could be a billion dollars worse than predicted, and is likely to require cuts to public education and other services.
At the Senate Finance Committee's annual budget retreat, held here yesterday and today, staffers told senators they think Gov. Tim Kaine's estimate last month of a $2.5 billion budget shortfall over two years is too optimistic.
The staff believes the shortfall will be more like $3.2 billion to $3.5 billion.
They think this because the recession seems to still be worsening, and consumers are cutting back spending--something they didn't do in the 2001 recession--due in part to increasing limitations on credit.
The Senate staff also fears the recession may last for four fiscal quarters, instead of three.
"We believe the situation has deteriorated over the last several months," said committee Chairman Sen. Chuck Colgan, D-Prince William. "Our fiscal outlook is uncertain at best. As a result we must err on the side of caution."
As a result of the worsening economy, Kaine announced last month that he was lowering revenue estimates, expecting a $2.5 billion shortfall between now and 2010, and would cut the budget and use some of the state's Rainy Day fund to cover the shortfall.
But Kaine is limited in what he can cut on his own, without legislative approval. And his own budget proposal, due in January, may reflect more gloomy prospects closer to the Senate's estimate.
Kaine avoided cuts to K-12 education and services like Medicaid, but senators yesterday said they will almost surely have to make cuts to those areas to meet this shortfall and prepare for a long, slow economic recovery.
That's preferable, they said, to using budget gimmicks or one-time cuts to fix an immediate budget problem, which is what Colgan said they did in the last recession.
"We don't want to repeat the error," he said.
Education and aid to localities and individuals are on the table because they comprise the bulk of the general fund budget.
Education funding makes up more than a third of the general fund budget; aid to localities, which includes money for schools, is half of the general fund budget.
Aid to individuals comprises 15 percent of the 2008-2010 budget; of that, 84 percent is Medicaid funding.
Altogether, Kaine's cuts last month exempted more than 75 percent of the general fund budget.
"It's pretty clear K-12 will have to take some cuts," said Sen. Edd Houck, D-Spotsylvania, who chairs the Senate Education and Health Committee. "It's going to be painful, there's no escape."
Houck said, however, that he hopes to avoid cuts to basic education services and base funding, which he and others have worked for years to increase.
"I don't want to do anything that structurally changes the Standards of Quality," he said.
Instead, if education has to take a hit, he'd like it to be in areas with a more indirect impact.
For example, Houck said schools could postpone a planned adoption of new textbooks, which could save $70 million.
And, he said, the state is funding 100 percent of its share of insurance premiums for teachers, while only about 70 percent of teachers use that health insurance. Cutting that to reflect usage would save money, Houck said.
And it seems likely that state money for planned teacher pay raises--as well as those for other state employees--won't be coming next year as planned.
"It's pretty clear the second-year salary increase is probably going to go by the wayside," Houck said.
He said he's been urging local governments and education groups to talk to each other and to him about how to make cuts that will have the least impact.
"I think we can do it without seriously undermining the progress we've made in public education," Houck said.
Sen. Richard Stuart, R-Westmoreland, who isn't a member of the Senate Finance Committee but attended the meeting, said he agrees with Houck.
He doesn't want to see education funding cut, but doesn't consider what Houck has proposed to be cutting structural funding for schools.
Senators also discussed additional reductions, and it will not be until the legislative session early next year before they make final decisions about such cuts.
But Houck added that if everything is "on the table" to be cut, he wants to make sure some other expensive budget items are there--like the car tax cut.
That tax cut, enacted after then-Gov. Jim Gilmore pushed it in the late 1990s, is now costing the state $950 million a year.
"It should be examined because it's an expenditure just like every other expenditure," Houck said.
Chelyen Davis: 804/782-9362
Email: cdavis@freelancestar.com
