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Kaine Orders Further Budget Cuts as Recession Drags On

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By Anita Kumar
Washington Post Staff Writer
Tuesday, May 12, 2009

RICHMOND, May 11 -- Gov. Timothy M. Kaine said Monday that the financial stress facing Virginia appears to be worse than was predicted earlier this year and that state agencies might be forced to cut an additional $225 million to keep the books balanced through the financial crisis.

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"We are now in the longest recession since the Great Depression," Kaine told reporters. "We are in what is a very challenging time for states and local governments and families and businesses."

Kaine (D) said revenue collections for the year are expected to be down 8.8 percent from 2008 levels -- about 1.5 percent lower than predicted earlier this year, when the legislature was in session.

The governor told the directors of his state agencies that they will need to start looking for deeper budget cuts, although he did not tell them how much or where specifically to cut. This marks the fourth time since the budget took effect in July that he has ordered them to make additional trims.

He also spoke to state lawmakers by conference call and has directed Finance Secretary Richard D. Brown to brief the House Appropriations Committee on Tuesday about the latest declines.

Senate Majority Leader Richard L. Saslaw (D-Fairfax) said that although he is concerned about the possibility of having to make deeper cuts to the budget, lawmakers need more data before they can decide how best to proceed.

"You really have to wait and see," he said. "If it doesn't look [good], then we will have to do what we have to do."

Brown said that several of the state's primary sources of revenue, including sales and income taxes, have been showing declines.

The state will complete its April revenue report at the end of this week. The timing is crucial because state income taxes are due May 1 and the fiscal year ends June 30.

"This is make-or-break time as to whether you make your estimates," Brown said.

The General Assembly passed a two-year, $77 billion budget this spring that used $1.5 billion in federal stimulus money to help offset a $3.7 billion shortfall.

Cuts were made to essential services, including education, health care and public safety. About 379 state employees were laid off between July 1 and March 31. In addition, 510 employees were transferred or demoted.

Lawmakers agreed to put $160 million in reserve for future economic problems. The state could use that money but would still need to find more.

"That gives us a little cushion,'' Kaine said.

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