Virginia Gov. Charles S. Robb, citing a revenue shortfall caused by the nationwide recession, said today he will be forced to cut spending for existing state programs this year in order to avoid a potential financial crisis in state government.
In what his aides had billed as a major policy initiative, the Democratic governor ordered his agency heads to sign binding contracts with him in which they clearly spell out their plans for axing nonessential programs, and warned them they will be held accountable for their performance.
Robb's stern warning was prompted by mounting concern over the mass layoffs and huge budget deficits facing other state governments, such as Michigan and Ohio, and a grim new revenue projection suggesting that Virginia could be headed down the same path.
"This is not a crisis at this point," Robb told reporters after his speech to about 50 agency heads. "But we want to take prudent action to make sure that it does not become a crisis."
The governor, while declining to disclose the size of the cuts he is anticipating, emphasized that no program or department is exempt. "As far as I'm concerned, everything is on the table," he said.
The new revenue figures, presented this week to legislative leaders, are an example of how the recession has wreaked havoc on state budget forecasts. Due to rising unemployment and a slump in consumer spending, sales and income tax receipts were nearly $25 million less than what had been projected for the first 10 months of the fiscal year ending June 30.
Sales tax receipts were particularly ominious--barely half the 7 percent growth projected in January when state policymakers were anticipating economic recovery during the third and fourth quarters of the fiscal year.
Stuart W. Connock, assistant secretary for financial policy, said today that the state still hoped to meet its overall revenue forecast for the year thanks to surging corporate income tax receipts, a sign that businesses were failing to take advantage of Reagan administration tax breaks designed to encourage investment in new plant and equipment. But the state's biennial budget forecast for 18.6 percent revenue growth during the next two fiscal years seems all but impossible to meet, he said.
"With unemployment the way it is and interest rates still high, where is that growth going to come from?" Connock asked.
He said that the state is trying to come up with more realistic revenue projections based on a computerized model of the state's economy devised under a contract with Chase Econometrics, a leading economic forecasting firm. The new projections, which will be ready in about a month, will determine the size and extent of Robb's cuts in appropriated spending, he said.
Robb's warning to the agencies came a day after the governor and state officials met in Washington with members of Virginia's congressional delegation over the financial problems. After that meeting, Sen. John W. Warner said he was convinced federal social programs "have been cut to the bone."