Kaine Considers Fee Increases, Too
By Tim Craig
Washington Post Staff Writer
Tuesday, September 18, 2007
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.
"If we begin the practice of utilizing the state's rainy day fund during a non-recessionary period, then we run the risk of establishing a bad and undesirable precedent that suggests we can overspend taxpayer resources without consequence," said Del. Vincent H. Callahan Jr. (R-Fairfax), the outgoing chairman of the House Appropriations Committee.
About half of the shortfall, which followed years of robust economic growth, can be attributed to a slowing housing market. But Callahan said Kaine is directly responsible for the other half.
Callahan said the Kaine administration underestimated by $175 million how many people would take advantage of land preservation tax credits. It also miscalculated how much interest the state would earn from the general fund, reducing revenue by $120 million, he said.
"Without these two errors, the shortfall would be too minimal to allow for a withdrawal from the rainy day fund," Callahan said.
The issue is becoming entangled in this fall's elections for control of the General Assembly.
Jay Donahue, a Democrat challenging Del. Thomas Davis Rust (R-Fairfax), issued a statement saying the General Assembly should have done its own analysis before approving the budget.
"The short answer is the House of Delegates didn't do their job. . . . They failed to plan correctly and double-check their work," Donahue said.
House Republicans, meanwhile, are squabbling with Kaine over how quickly the governor has to inform them of potential budget cuts.
Since its 2004 struggle with then-Gov. Mark R. Warner (D) over budget cuts, the General Assembly has twice approved language that says the governor has to send the assembly written plans detailing possible budget cuts within five business days after an agency sends such plans to the administration.
Kaine and Warner vetoed that budget language, saying the General Assembly did not have the authority to insert it. Lawmakers maintain that the vetoes were invalid because the governors did not have the authority to veto budget language without vetoing the entire budget.
On Friday, Kaine received a detailed plan from each agency outlining possible budget cuts. House Republicans said Monday that the administration will be violating the law if legislators do not receive that information by Thursday.
"This is the law. Why aren't you all following the law?" asked Del. Phillip A. Hamilton (R-Newport News). "There is no ambiguity. Five days is five days."
Kaine spokesman Kevin Hall said of the Republicans, "It is unfortunate they continue to play politics while the governor and his finance team are making hard choices to balance the budget."
House Majority Leader H. Morgan Griffith (R-Salem) countered that the General Assembly needs the unfiltered list of possible agency cuts because lawmakers may have to cut the budget further if they decide not to tap the rainy day fund.
"I think we are at a point where we can tighten our belts and be okay without dipping into our long-term savings," Griffith said.
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