Kaine Orders Agency Spending Cuts, Has Eye on Rainy-Day Fund

"I think we can handle the shortfall," said House Majority Leader H. Morgan Griffith (R-Salem). "But it is going to be very difficult for any new programs to start."

Kaine said his Cabinet secretaries will look for ways to trim their operating budgets by 5 percent. He also will reduce all 2008 non-state agency grants by 5 percent. Cabinet secretaries will also have to approve each new hire and personally authorize out-of-state travel, Kaine said. Several Cabinet secretaries declined to comment Monday on whether the cuts would affect services.

Even as he called for fiscal restraint, Kaine vowed to push to extend state-funded pre-kindergarten to 17,000 4-year-olds eligible for reduced-price school lunches.

If approved by the General Assembly, the initiative will cost $75 million annually.

Kaine, who will formally unveil his budget in January, said he also wants to increase spending on mental health, an issue highlighted by the April 16 massacre at Virginia Tech. "Both pre-K and mental-health issues are areas to me, when resources are tight, you better target your resources to where they do the most good," he said.

Kaine also said the General Assembly may want to explore taking money from the state's $1.2 billion rainy-day fund to meet the budget shortfall. Republican leaders said it is unlikely they would use the surplus while the governor wants to expand pre-K programs.

"It is problematic to come forward with new proposals when you are talking about tapping rainy-day funds," said House Majority Whip M. Kirkland Cox (R-Colonial Heights). Kaine said he will decide in the fall on whether to push for the rainy-day funds.

Senate Minority Leader Richard L. Saslaw (D-Fairfax) countered that the state must expand pre-K to more disadvantaged students.

"If kids come from an environment with no books at home, you can pretty much predict the outcome over the next 12 years," Saslaw said. "The longer you wait, the farther they are going to fall."

Kaine acknowledged Monday that it is unclear how long the drop in revenue will last. Some Republicans said he is passing the tough decisions on to a future governor by suggesting use of the rainy-day fund.

"We are talking about a long-term problem, but we are looking at short-term solutions," said Del. Clarke N. Hogan (R-Charlotte).

Other legislators say the Republican-controlled House of Delegates' opposition to using taxes to pay for transportation is partly to blame for the deficit. In December, after his plan to raise the sales tax on vehicles failed, Kaine announced that the state had a $500 million surplus in the fiscal 2007 budget. Kaine earmarked that one-time money for transportation needs.

In February, the General Assembly and Kaine agreed on a transportation plan that didn't include a statewide tax increase. "What happened in the last session is coming back to haunt us," said Senate President John H. Chichester (R-Northumberland), who had been an advocate of a tax increase to pay for new roads.