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Budget Shortfall Forces Va. to Cut Hundreds of Jobs

By Tim Craig
Washington Post Staff Writer
Friday, October 10, 2008

RICHMOND, Oct. 9 -- Virginia Gov. Timothy M. Kaine announced Thursday that he is laying off nearly 600 state workers, closing some prisons and cutting funding for higher education by about 6 percent as the state struggles with one of its worst financial crises in modern times.

Kaine (D) has warned for weeks that the nationwide economic downturn is changing the state's revenue estimates. On Thursday, he put a specific number to that prediction: a $2.5 billion shortfall for Virginia's two-year 2009-10 budget.

"Why is there a shortfall? Businesses are hurting; they are making less money. Citizens are hurting; they are making less money," Kaine said. "When they make less money, they pay less taxes."

Virginia is now expected to take in less money this year than it did last year -- a phenomenon that has happened only twice in the past 40 years.

The 570 layoffs, which take effect immediately, will be scattered across government and the state's higher education system. Kaine said the state will leave vacant an additional 800 jobs.

He said that because most of the layoffs will be in administrative positions, he hopes to minimize service disruptions. But he warned that more jobs probably will be lost in the coming months.

The governor said that Thursday's moves will close about half of the shortfall but that the challenge will be ongoing and will require additional spending reductions. The General Assembly will have to consider some "big policy choices" when it convenes in January, he said. Kaine mentioned the criminal justice system and public education as two possible areas for future savings in the two-year $77 billion budget.

"We are going to have to take a close look at all of our programs and ask the tough questions," Kaine said.

For now, Kaine attacked the most immediate problem: a $973 million shortfall in the current year's budget. In addition to the layoffs, Kaine announced that he is delaying a planned 2 percent pay raise for state employees until next year, transferring $400 million from the "rainy day" reserve fund and slashing spending by about $279 million.

Those cuts follow $1.7 billion in cost reductions the administration made last year.

So far, Kaine said, he is sparing K-12 education from any sizable reduction and is also protecting programs that provide direct services to residents, such as mental health treatment. But he said that could change in the next round of cost savings.

The spending reductions announced Thursday will affect nearly every state agency.

Several camps for at-risk youths will be closed. The Virginia Museum of Natural History in Martinsville will not open on Sundays and Mondays to save $152,000 annually. State fire marshals are being told to work fewer hours. Virginia is also borrowing money to pay for $250 million in ongoing capital projects.

Based on revised revenue estimates, Kaine said he is now projecting a 4 percent decline in revenue in the current fiscal year -- the steepest in at least 40 years. In 2002, when the state was dealing with the aftermath of the Sept. 11, 2001, terrorist attacks, revenue declined 3 percent. It dropped less than 1 percent in 1991, when the country was in a recession.

The new estimates project that revenue will grow by 3.6 percent in fiscal 2010 after having been forecast to grow by 6.8 percent.

House Majority Whip M. Kirkland Cox (R-Colonial Heights) said that Republicans are eager to work with Kaine to find savings but that he fears the budget problems are even worse.

"I think it is going to be at least $3 billion," Cox said. "I think we are in for a very tough year."

The cuts to higher education, which range from 5 to 7 percent for each institution, are unlikely to have an immediate impact on quality, said Kaine, adding that he did not think they would affect tuition.

Leonard Sandridge, executive vice president and chief operating officer of the University of Virginia, said the college's $10.5 million cut will probably mean some unfilled jobs and reduced administrative costs.

"We will be diligent in our efforts to try to adjust to those cuts in a way that protects quality and protects services," Sandridge said.

Legislative analysts said the cuts will have the greatest impact on the Department of Corrections, which will lose more jobs than any other agency.

Kaine said the Pulaski and Southampton correctional centers and several other detention facilities will be closed and the inmates will be transferred to other locations.

Fifteen counselors -- one at every major correctional center -- will be laid off, and probation officers will have less money to conduct drug tests on offenders on parole or probation.

The cuts could have been much worse had Kaine not decided to use money from the state's $1 billion "rainy day" reserve. But the fund might be tapped again in January when lawmakers and Kaine figure out how to close the remaining shortfall.

Kaine said the extent of the budget problem will mean that the next rounds of cuts could be far more painful, including cuts to local government, social programs and schools.

"Things left untouched in '09 are going to be examined" next year, Kaine said. He said he has no plans to seek a tax increase, but some interest groups affected by the cutting may push for one.

Kitty J. Boitnott, president of the Virginia Education Association, noted that the General Assembly has approved a number of tax cuts or credits in recent years.

"In this time of crisis, we should look at all aspects of the budget, not just spending," Boitnott said.

But Kaine said legislators should also use the shortfall as an opportunity to scrutinize state laws and policies to find changes that would result in more lasting savings, such as reviewing reforms to the prison system.

"You can't come in and eliminate Post-it notes and paper clips to balance this budget," House Minority Leader Ward L. Armstrong (D-Henry) said.

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