Kaine Proposes Cuts To Deal With Budget Shortfall
posted 5:48 pm Tue February 12, 2008 - Richmond
Kaine wants state agencies to draft plans to slash spending by an additional half-percent in the current fiscal year, which ends June 30, and 3 percent in the next two-year budget. The cuts could include an unspecified number of layoffs, the governor said.
He proposed taking an additional $162 million from the state's so-called "rainy-day" fund, bringing the total withdrawal to $423 million.
The plan, which the General Assembly will consider in its budget deliberations, does not include any tax increases. Kaine said families and businesses, like state government, are struggling because of the softening national economy.
"This would not be the right time to ask them to do more," Kaine said at a news conference.
The governor's plan also spares basic state aid to public schools, aid to localities for at-risk children, and mental health, which Kaine and legislators are striving to improve after last April's shooting deaths of 32 people at Virginia Tech by a mentally disturbed student.
However, he proposed scaling back state employee and teacher raises by 1 percentage point, to 2 percent and 2.5 percent, respectively. Those would be the first cuts reversed if revenue collections improve, Kaine said.
About $82 million in lottery profits earmarked for school construction would be shifted to school operational funds, and the state would borrow rather than pay cash for about $300 million in state construction projects.
State colleges, which bore the brunt of the previous round of cuts, would be exempt from further reductions this year but would have to trim 2 percent from the next biennial budget.
Kaine's plan does not touch the car tax relief administered by local governments and paid for by the state. However, localities would be expected to trim other state-funded programs by 5.4 percent.
Medicaid reimbursement to hospitals and nursing homes would be trimmed by $75 million by eliminating an adjustment for inflation, Kaine said.
"Clearly, there are several strategies proposed by Governor Kaine that we will not adopt, such as additional cuts to higher education, which would merely result in greater tuition increases, hitting middle-income Virginians particularly hard," House Appropriations Committee chairman Lacey Putney, I-Bedford, said in a written statement.
"Likewise, we will scrutinize proposed reductions in local aid, which come at a time when local governments are struggling to balance their budgets with declining real estate values."
The governor made his recommendations after his economic advisers took another comprehensive look at the economy and lagging tax collections. Based on their recommendations, Kaine revised revenue growth projections from 3.3 percent to 1.2 percent for this year and from 3.3 percent to 2.2 percent in 2009.
The projected growth rate for 2010 went from 6.7 percent to 6.8 percent, but Kaine said the increase is misleading because it is built on a smaller base. Collections that year actually will be $532 million less than previously expected, he said.
Kaine described the plan as the administration's "best effort, a good-faith effort" to cope with a tough economic environment. He said he didn't expect the General Assembly to fully embrace everything in the proposal.
The House Republican leadership had objected to Kaine's earlier proposal to withdraw about $260 million from the rainy-day fund to address what was then a projected $620 million shortfall in the current budget.
House Speaker William Howell of Stafford County said before Kaine delivered the latest round of bad news that dipping into the rainy-day fund didn't seem appropriate based on the previous slow rate of growth.
"It's more appropriate when it has slowed to the point it has now," said Howell, adding that the amount of the withdrawal still might be a point of contention.
Kaine said a $423 million withdrawal will leave about $800 million in the state's savings account.
Latest Comment on Kaine Proposes Cuts To Deal With Budget Shortfall
John61
12:19 pm on 02/13/08
Now that is intelligence at it's finest. Lets cut cut cut, then lay off working people so we can build a rail system for the business people who druel over building Tysons city. Cut the rail and keep the jobs in the state. If we don't have the jobs, there will be no need for the rail. Please put smart people back in office to run our state and country. These politicians get elected and leave there brains behind. I cannot believe such intelligent folks can turn into such greedy and dumb people just by getting elected.
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