Virginia Gov. Charles S. Robb said today that the state's projected revenue shortfall will grow to $305 million over the next two years, forcing a new and more drastic round of spending cuts that could touch "every item in the budget."
The governor's somber forecast -- for a shortfall double the size of previous estimates for the current 1982-1984 budget -- alarmed some legislators and set off the opening salvos in what is expected to be a heated fight among lawmakers and interest groups during the upcoming General Assembly session.
Robb said a tax increase "is not presently contemplated," but otherwise refused to speculate on how he will make up the revenue gap until he addresses the legislature Jan. 12. Nevertheless, battle lines began to form with several key conservatives calling for across-the-board cuts in spending that would carve into the politically sensitive area of state aid to local governments.
"If you're going to go fishing, you have to go where the fish are," said W. Roy Smith, a Petersburg businessman who is head of the governor's Economic Advisory Council. "It can reasonably be expected that it will be difficult to exempt that area aid to localities entirely."
In the current two-year budget, $3.2 billion in state revenues collected in Richmond are returned to local governments for schools, police, courts and a wide array of other services.
But the so-called "even-handed," across-the-board approach, which is also being advocated by Del. Alson H. Smith (D-Winchester), another close Robb adviser, would almost certainly produce an outcry from local officials and interest groups, such as the Virginia Education Association, worried about cuts in school funding. "They'll raise hell," said House Minority Leader Del. Vincent F. Callahan (R-Fairfax).
There were also fears today of further cuts in already-crimped social programs, such as Medicaid, which recently absorbed a $122 million pruning that has reduced medical services to the poor. "There's no place left to cut in Medicaid," said Jill Hankin, lawyer for the Virginia Poverty Law Center. "It's hard to imagine where they can cut in social programs ."
Today's revised forecast culminates a process that began last spring when state officials first discovered that revenue collections, particularly from income and sales taxes, were running well behind projections because of the long recession. Robb, citing a projected $64 million shortfall for the fiscal year that began July 1, then ordered a 5 percent cut in state agency spending.
As state unemployment continued to worsen -- it climbed from 7.4 percent to 7.8 per cent in November -- tax collections sagged further. On Dec. 1, Robb froze spending on $35 million worth of capital construction around the state, including a new humanities center at George Mason University in Fairfax County and a waterfront improvements project in Alexandria.
Although Robb had warned at the time that further action would be needed, few legislators were prepared for the magnitude of the revenue gap he disclosed today. "It's worse than anything I've seen during my 17 years in the assembly," said Del. Richard Bagley (D-Hampton), chairman of the House Appropriations Committee.
Appearing before a joint meeting of the House and Senate fiscal committees, Robb said that recent forcasts of near zero economic growth nationwide had led him to lower the state's revenue estimates again. The new forecast, he said, is for a shortfall of $130 million during this fiscal year and $175 million next year.
This means that, on top of those cuts he has already announced, the state must still find $162 million to cut in the biennial budget adopted by the legislature in March, Robb said.
"I've been burning a lot of midnight oil" trying to find the money, he told reporters in the hallway of the General Assembly building.
Several legislators noted that, while the shortfall was far worse than they expected, it still represented a small fraction of the state's $13.7 billion biennial budget. "I'm surprised and even shocked" by the gap, said State Sen. Dudley J. (Buzz) Emick (D-Botetourt). "But it's not cause for terrible alarm."
Other legislators noted that Virginia's problems are not as serious as those in many other states, such as Michigan and Minnesota, which have been forced to raise taxes sharply and lay off massive numbers of employes. Typically, the Virginia legislators have had to deal with the problem of underestimating state revenues. During the last fiscal year, for instance, the state received $29 million more in revenues than it had projected.