Senate Leaders Might Press for Deeper Cuts

RICHMOND, Oct. 16 -- Senate leaders said Thursday that they may push for even greater budget cuts than Gov. Timothy M. Kaine had planned for next year because of continued uncertainty over the nation's economy.

Last week, Kaine (D) said Virginia faces a $2.5 billion shortfall in its two-year 2009-10 budget. To make up for a little more than $1 billion of that amount, Kaine said he is transferring money from the state's reserve fund, borrowing to pay for some ongoing construction and reducing state spending, including laying off about 700 workers.

Kaine plans to address the remaining portion of the shortfall in January, when the General Assembly convenes for its annual session. Kaine has said the next round of budget cuts could hit schools, social programs and other government services.

During a meeting of their chamber's Finance Committee, several senators said the shortfall could increase in the months ahead, which would cause deeper cuts.

Senate Majority Leader Richard L. Saslaw (D-Fairfax) said he would plan for a worst-case scenario so additional budget cuts are not needed in late 2010 if the economy doesn't rebound. "I'd rather have the governor call us back in May [2010] and say . . . we have more money than we need rather than come back and say we have to take money out" of the budget, Saslaw said.

Saslaw also said the committee learned that the Virginia Retirement System has lost more than $10 billion because of the recent market declines.

But Saslaw said the system, which had $55 billion in June, is financially sound. The director told lawmakers that the system has a solid cash position and can meet its obligations.

"They have generally kept it in very safe and secure stuff," Saslaw said. He said the system, which serves nearly 140,000 state and local government employees, has had an average return of 10 percent annually for the past two decades.

"It has fallen the last couple of weeks, but that is not uncommon," Saslaw said.

The bulk of the meeting centered on the operating budget. Richard D. Brown, secretary of finance, said the administration is confident about its projections, but the shortfall could grow to $3 billion if the economy does not start rebounding next year.

Sen. Kenneth W. Stolle (R-Virginia Beach) said he worries that Kaine has not been aggressive enough in ordering immediate cuts. Stolle and other GOP lawmakers also worry that Kaine is taking too much money from the state's $1 billion reserve fund.

Kaine wants to take $400 million from the fund this year. Senate Democrats said Thursday that they might push to take $300 million next year to protect spending for other programs.

Neither Kaine nor legislators appear to be considering a tax increase.