RICHMOND
--Gov. Tim Kaine told lawmakers that state revenues will be $1.2 billion less than anticipated for the current budget year, and that cuts--possibly including layoffs--will be required."While we've made many tough decisions, we're not done," Kaine said in a speech to the legislative money committees.
The lowered revenue forecast brings the state's shortfall to $1.5 billion over the 2009-2010 budget biennium. The state fell $300 million short toward the end of the 2009 fiscal year, which ended June 30.
Kaine said he expects revenues to be 1.6 percent less than expected in fiscal year 2010; 2009 revenues were more than 9 percent less than expected, and Kaine said this is the first time in Virginia history the state has seen revenue decrease two years in a row.
Kaine did not specify how he will make $1.2 billion in cuts from the budget; he plans to announce cuts in early September.
He has already asked state agencies for plans to cut 5 percent, 10 percent and 15 percent from their budgets, and will use those to help his decisions.
But he said cuts will not be across the board. Instead, they'll be targeted, focusing on performance, priorities and transparency, Kaine said.
He said he may also use reserve funds, unallocated balances and other means to make up the balance.
The reductions "will be painful to those who rely on public services at this very challenging time," Kaine said.
He said education funding is not necessarily exempt from cuts, even though the school year has begun, although he told reporters he will "certainly have a lighter hand with K-12" than other agencies.
Kaine also was not specific about possible layoffs of state workers, but said they're likely.
"I would certainly think there would be some," he told reporters.
Kaine strove for a positive spin on the shortfall, telling lawmakers that there are signs the economy may be improving, and noting that despite several years of budget cuts, Virginia still has the highest bond rating and ranks as a well-managed state.
"My main message to you today is that while the national economy continues to create difficulties, Virginia has managed through this extraordinary time with skill and creativity," Kaine said. "We have more tough decisions to make. But we are well-positioned to maintain our leadership stature among states as the economy improves."
A $1.2 billion shortfall was on the high end of predictions offered Kaine by economic advisors. Legislators said they were glad he went with a more conservative forecast.
Del. Phil Hamilton, R-Newport News, a member of the budget-writing House Appropriations Committee, praised Kaine for listening to lawmakers who pushed for a cautious outlook.
"The governor is being very, very cautious and very conservative," Hamilton said. "The governor's got a tough job ahead of him."
Hamilton, an educator himself, said there's no way to hold education spending harmless from cuts.
"Public education is 34 percent of our general fund budget," Hamilton said. "You don't have any sacred cows."
Del. Albert Pollard, D-Lancaster, said he voted against the two-year budget back in February because he felt the economic forecast it was based on was too optimistic.
"Sadly, I was right," Pollard said. "It's wise to take the most cautious approach forward as we can."
Pollard said he doesn't look forward to budget cuts, but that necessary cuts must "start from the premise that everything's on the table and we move backwards from there."
Sen. Edd Houck, D-Spotsylvania, a member of the Senate Finance Committee, said he heard what he expected from the governor.
Houck, who fought certain cuts to education proposed by Kaine during the regular session, also said he doubts education can avoid cuts this time, although he will work to minimize them.
Del. Mark Cole, R-Spotsylvania, said the Kaine administration has "consistently overestimated reve- nues," and he hopes this latest revenue reforecast will prompt changes.
"We need to start being more conservative in our revenue estimates so we don't keep having to do this every year," Cole said.
He believes federal legislation, such as the cap and trade bill and the health care reform, will worsen the economy, not improve it, and that it's too early to talk optimistically about an end to the recession.
Del. Bobby Orrock, R-Caroline, agreed. He questioned Secretary of Finance Ric Brown about what will happen next--not in the 2010 budget the state is in now, but in the 2011 and 2012 budgets, when the federal stimulus money that saved the state from deeper cuts is gone.
The answer was what Orrock feared--that potential revenue growth when the economy improves is unlikely to make up for the loss of federal money by 2011.
"2011 and 2012 are not looking good," Orrock said.
Chelyen Davis: 540/368-5028
Email: cdavis@freelancestar.com