When Virginia's General Assembly begins its work Wednesday, the governor and legislators will focus most of their attention on the $1.2 billion budget deficit that confronts the state. It is critically important that the shortage of dollars is not accompanied by a dearth of ideas for modernizing the state government.

Years of benign neglect have left Virginia with a set of creaky political institutions and outdated government practices that made the current shortfall worse than it had to be. As recent revelations about the state's transportation department have made clear, agencies have been allowed to waste money through inattention and mismanagement. Left unchanged, the situation could seriously hinder Virginia's chances in the fierce global competition to attract businesses, research dollars and talented workers.

Virginia ought to be relatively well-positioned in this contest: It has an enviable location, an economic engine of dynamic growth in Northern Virginia, and a generally excellent educational system. But there is a growing sentiment that Virginia is not organized to make the strategic choices that can guarantee long-term success.

For evidence, we can look to the Wilder Commission, a panel of business and political leaders headed by former governor L. Douglas Wilder and charged with recommending ways to run Virginia more efficiently. The commission recently reported that the state government has let potentially hundreds of millions of dollars slip through its hands.

The major reason: Virginia's government operates more as a set of independent fiefdoms than as an integrated organization with common purposes. The commission found that the state did not negotiate the best discounts for its major purchases. State agencies bought expensive and duplicative computer systems. There is no process for coordinating office leasing across agencies. And $5.6 billion owed the state is past due; $3.1 billion of that has been declared "uncollectible."

In almost every situation the commission probed, a similar dynamic was at work. The basic problems identified by the panel invariably had been flagged in a previous study -- often in numerous studies. But because responsibility for the state's business operations is so widely dispersed across the government, no one had either the authority to fix the problem or the incentive to fight the turf battles that inevitably would ensue.

The commission's report outlined a number of practical steps that can be taken to achieve the unrealized savings. But a broader solution will come only with a change in the underlying mind-set and culture of state government -- one that establishes strategic directions, assigns responsibilities to accomplish them, and then measures performance against established goals.

That solution rests, at least in part, with the General Assembly. Legislators can begin tackling the tough job now -- in the 2003 session -- or they can wait until the next session, or the next, hoping that festering problems will resolve themselves and pretending that other states are not really passing them by.

The structural problems begin right at the top, with the office of the governor. The state's constitution prohibits a sitting governor from running for reelection. Gov. Mark Warner has proposed removing that barrier. Permitting an incumbent to run for reelection is a way to enhance accountability, maintain continuity and pursue long-term strategies that might not be achievable in a single term. The citizens of every other state in the country have the right to reelect -- or reject -- their governor at least once. Virginians should have the same right.

The governor's performance is weakened by the timing of Virginia's biennial budget cycle. As it works now, the lame-duck governor draws up a budget that will be in place for the first two years of the new governor's term. The newly elected governor has only 40 days to recommend modifications of that budget, then does not formulate his own budget until the third year of his term.

The budget cycle should be changed so the new governor's first year in office falls in the second year of the biennial budget. That would give newly elected governors a smoother transition into office and the ability to formulate their own budgets earlier in their term.

On the legislative side, the General Assembly should improve its effectiveness by doing a better job of monitoring and enhancing the direction and performance of the state. In particular, Assembly committees should use the power of legislative oversight to measure, hold accountable and publicize the performance of government far more extensively than it now does. To do that, the Assembly doesn't need to pass more laws. But it does need to employ more skillfully the array of tools that modern legislatures use -- hearings, studies and investigations, and the identification of long-term goals -- to monitor performance and raise public awareness about the major choices facing the state.

Perhaps the most glaring piece of structural obsolescence in Virginia today is manifested in the relationship between the state government and the localities. The problem is most visible in the antiquated set of rules governing the respective powers of counties, cities and towns, written for an era in which counties were sparsely settled rural areas and population growth was concentrated in the more urbanized towns and cities.

The result is a bizarre hodgepodge of regulations governing the taxing authority and governmental responsibilities of the different units. Cities and towns can levy taxes on cigarettes, meals and hotel rooms, but counties cannot. On the other hand, the state provides road maintenance equipment to counties, but not to all cities.

It is not surprising, then, that the Fairfax County Board of Supervisors has instructed its attorneys to figure out whether the county would be better off if it attempted to incorporate as what County Executive Anthony Griffin has called the "City of Fairfax County."

Fairfax County's dalliance with cityhood is really a symptom of a much larger problem: the strained and almost poisonous relationship between Virginia state government and its local jurisdictions. From the perspective of many state-level leaders, localities ask the state to bail them out of their bad decisions and are reluctant to engage in the kind of belt tightening that state government has undertaken. For their part, localities resent treatment that they consider to be a distasteful mix of paternalism and neglect. They chafe at the regulations that limit their autonomy, and they consider the state to be an unreliable partner in funding the commitments it has made to local education and public safety.

Nowhere is this problem worse than in Northern Virginia, where distrust of Richmond is now the dominant political sentiment. Leaders of all political stripes routinely voice a rhetoric of self-determination and sprinkle it liberally with secessionist metaphors. As Fairfax County Supervisor Elaine McConnell puts it, "I want to look at all opportunities that would allow us to keep more of our money at home for our people and break away from Richmond."

One cannot overemphasize how potentially destructive it will be for both Northern Virginia and the state to continue down the current path. The last thing Virginia needs is to have its most prosperous region at war with the rest of the state. It would be far more fruitful to redirect the state's focus to concrete proposals that can both maintain Northern Virginia's competitive advantages and replicate its economic vitality in other regions.

In the next few years, Virginia will confront choices that could determine its relative standing for a generation and beyond. What kind of tax system is appropriate for the 21st century? How will the state resolve its formidable transportation problems? How can our educational system be first-class? And how can residents who have not shared in Viginia's recent prosperity be given an opportunity to flourish? We'll do a better job of answering those questions with a state government truly organized to address long-term interests. Robert Holsworth is a professor of political science at Virginia Commonwealth University and recently served as executive director of Virginia's Wilder Commission.