Va. Budget Shortfall May Mean Layoffs

Kaine Considers Fee Increases, Too

RICHMOND, Sept. 17 -- Virginia might have to lay off state workers, increase user fees and curtail some regulatory inspections because of a $640 million budget shortfall, state officials said Monday.

In a presentation to the House Appropriations Committee, Secretary of Finance Jody M. Wagner said Gov. Timothy M. Kaine (D) is exploring steps to cut the budget by 5 percent to cover part of the gap.

Kaine will not unveil specific plans until next month, but administration officials said the governor is eyeing the elimination of "several hundred" positions out of a workforce of 100,000 people. Kaine hopes many of the reductions can be achieved through attrition, but some layoffs are likely, Wagner said.

"It is really going to be very selective layoffs of selective people," she said.

Wagner said the administration might also have to reduce staff training, establish or increase some fees and reduce the frequency of regulatory agency inspections. Kaine is also considering paying for some construction projects with borrowed funds rather than cash.

Wagner said most of the budget cuts will be felt "internally," meaning that the public might not see a reduction in services. But she added, "I would love to tell you there will be no impacts to programs, but that would be disingenuous."

Despite the shortfall, Virginia appears to be on a relatively stable financial footing. Kaine announced that the state has retained its AAA bond rating, the highest it can earn. The state has held that rating since 1938.

But the budget gap will probably become a major issue in the General Assembly session that starts in January.

Wagner said a 5 percent reduction in spending would achieve only about $290 million in savings, less than half of what is needed to close the shortfall in the 2007 and 2008 fiscal year budgets.

Kaine is considering asking lawmakers to tap the state's "rainy day" fund to make up the difference. If money is not diverted from the state's $1.2 billion reserve fund, the cuts will be far more severe, perhaps as much as 15 percent of some agency budgets, Wagner predicted.

"If you told me I had to cut 15 percent today, it would be ugly," Wagner said in an interview.

Republicans say they will oppose taking money from the reserve fund, which they say is designed for a recession or emergency.