Tax Receipts Sink to 10-Year Low

'Significant Drop' Adds to Shortfall Worries

RICHMOND, Feb. 13 -- Virginia tax collections for January fell 15 percent, the worst drop in state revenue in at least a decade.

The monthly report, released late Friday, marks the sixth straight decline in the state's tax receipts.

"It's a significant drop, no doubt about that,'' said Richard D. Brown, Virginia secretary of finance. "There's not a lot of positive news in this."

Gov. Timothy M. Kaine (D) will release a revised estimate of the state's escalating budget shortfall as early as Monday.

Friday's news ensures that the shortfall will grow substantially beyond the $2.9 billion gap Kaine estimated in December.

In Maryland, anticipated tax revenue could be at least another $500 million less than prior projections for this fiscal year and the coming one, state analysts said Friday.

Gov. Martin O'Malley (D) and lawmakers are working to close a combined shortfall of $2.3 billion in the state's general fund for those two years. Next month, state officials plan to release revised revenue estimates that will factor into the budget lawmakers are due to pass in April.

Most major sources of revenue, including sales and income taxes, have been lagging during the economic downturn.

In Virginia, the drop can largely be attributed to a historic 26 percent decline in non-withholding taxes paid by investors. That accounts for about 17 percent of the general fund. Individual income tax withholding receipts were down by 10.6 percent. That money accounts for almost 61 percent of the budget.

Since the start of the fiscal year July 1, revenue has fallen about 5.5 percent, greater than the forecast of 4.8 percent.

House and Senate committees released their version of the state's two-year $77 billion budget this week. The full House approved their budget plan, but the Senate delayed passing its version until Kaine releases new revenue numbers. State legislators from both parties say they estimate that the shortfall will be at least $3.3 billion, perhaps as high as $4 billion.

"We expected it to be bad,'' said House Majority Leader H. Morgan Griffith (R-Salem).

Virginia has begun eliminating thousands of jobs, slashing agency spending by 15 percent and trimming almost $1 billion from K-12 education and Medicaid, which helps cover medical needs for the indigent, elderly and disabled.

The state could receive billions of dollars from the federal stimulus package, but those funds are targeted for such areas as education, transportation and Medicaid. Senate Majority Leader Richard L. Saslaw (D-Fairfax) said he hopes the state's economy begins to rebound by next year because the stimulus will be available for only one or two years. "This is one-time money,'' he said.