Governor Timothy M. Kaine announced Tuesday the revised revenue forecast for fiscal years 2008 through 2010, as well as a budget reduction plan designed to deal with the shortfall in state revenue brought on by the national downturn in the economy. The shortfall for the remainder of fiscal year 2008 and fiscal years 2009 and 2010 totals nearly $1.4 billion.
The Governor’s proposed strategy to meet the shortfall includes increased utilization of the Revenue Stabilization Fund; targeted reductions to the Governor’s initiatives and other programs; percentage cuts to executive agencies; and bonding of capital projects. While the plan does include some targeted reductions in K-12 education and percentage cuts to some local aid, it does not reduce funding for the constitutionally required Standards of Quality program in K-12 education. The Governor’s plan does not include tax increases.
“Since the November 2007 revenue forecast, the national economy has dramatically slowed,” says Kaine. “While Virginia can weather economic downturns better than most states, we are not immune. In the past week, we have gathered the most recent data and met with our leading economists, representatives of the private sector, and state legislators. The revised consensus revenue forecast indicates that we are now facing an additional shortfall of nearly $1.4 billion over the remainder of fiscal year 2008 and the 2009-2010 biennium.”
The revenue shortfall for the remainder of this fiscal year is projected to be $339 million. It is expected to be $520 million in fiscal 2009 and $532 million in fiscal 2010.
“My recommended revisions include an additional withdrawal from the Revenue Stabilization Fund, targeted reductions in spending, and percentage cuts to executive branch agencies,” says Kaine. “We sought to minimize the impact of the cuts on services and balance the burden of the cuts, keeping in mind that some agencies made bigger reductions in the first round of cuts we made in October.”
Kaine’s plan to address the shortfall in fiscal year 2008 includes utilization of an additional $162 million from the Revenue Stabilization Fund, as well as bonding for existing capital projects, and a mixture of targeted and percentage cuts to executive agencies. This plan brings the total proposed withdrawal from the Revenue Stabilization Fund to $423.5 million. The withdrawal will leave the account balance at about $800 million
For fiscal year 2008, Kaine is making 0.5 percent reductions across all executive branch agencies, excluding higher education institutions, which made significant cuts for fiscal year 2008 in October. He had already instructed agencies to take preemptive actions to address the shortfall, including a freeze on discretionary training, travel, and purchases and a requirement of an additional level of approval for hiring and entering consulting contracts.
For the 2009-2010 biennium, Kaine recommends continued percentage cuts to executive branch agencies at two percent for higher education and three percent for all other agencies. His plan also makes targeted cuts to budget initiatives, including his proposals to fund the expansion of existing pre-kindergarten education, the increase in foster care rates and foster care worker training, and the creation of the Virginia Share health insurance program. His proposal also includes a one percent reduction in proposed salary increases for state employees and teachers, the full proposed three percent for state employees and 3.5 percent for teachers will be included in the budget in 2010, if the revenues are available.
In addition, Kaine recommends 5.4 percent cuts in certain state aid to localities’ programs, excluding K-12 education and car tax relief. Under Kaine’s plan, localities may allocate the 5.4 percent cuts across state-funded local programs as they deem appropriate. The plan makes no reductions in funding for the Standards of Quality program in K-12 education. The Governor’s plan does, however, recommend a $55 million reduction in K-12 school construction funding over the biennium, and shifts $165 million of lottery proceeds from school construction to basic aid for K-12 operations.
To see the entire updated budget, visit the link below.