UPDATE: Dour Va. budget panel doubts even wary optimism

Updated 3:17 p.m.

RICHMOND, Va. (AP) — The Kaine administration put a hopeful face on a 9.3 percent revenue plunge in addressing legislative budget writers Tuesday.

But with gas prices soaring, the housing market still struggling and the auto industry crisis shuttering dealerships across the state, lawmakers looked for a reason to believe.

Finance Secretary Ric Brown explained to a sympathetic but dubious House Appropriations Committee why the government faces a $300 million budget shortfall for the fiscal year that ends in two weeks.

Brown told the panel Gov. Timothy M. Kaine has already begun reforecasting the official revenue estimate on which budgeted spending is based, likely the fourth time the estimate has been decreased in the past year.

After that, a new wave of layoffs and cuts are likely, and when lawmakers begin work reconciling the 2010 budget and drafting a biennial 2011-2012 budget from scratch next winter, they will find most of their reserved depleted.

Despite the worst drop in tax collections on record through 11 months of the fiscal year, Brown said, the worst may be over, and he cited glimmers of hope in marginal improvement in the volume of home sales, a slight decline in the April unemployment rate, and signs that consumer confidence may be rebounding.

``Given the indicators, there is some small sense of improvement,‘’ Brown said.

``It’s not as bad as it was a few months ago,‘’ he said later.

But discouraging headlines about the economy and the scary statistics that have resulted in shrinking state revenues left lawmakers skeptical at best.

``I want to be optimistic, too. Who doesn’t want to be?‘’ said House Majority Whip Kirk Cox, R-Colonial Heights, citing still-tepid sales tax receipts among other factors. ``Give me a little more hope for optimism.‘’

The good news, at least in housing, is actually a reflection of a weakened market that has cut prices so deeply that some buyers are taking advantage of irresistible bargains, he said.

``I think we got a way to go on housing. I’m not saying it’s tomorrow,‘’ Brown said. ``A lot of those sales are foreclosed, and a lot of those sales are taking place ... at dollar levels that are lower than assessments.‘’

Del. S. Chris Jones, R-Suffolk, wondered whether real estate sales would slide again with home loan rates spiking in recent weeks.

Del. Scott Lingamfelter, R-Prince William, said he worried how badly a spate of car dealership closures would damage the economy. Brown said it’s something that has not been studied, but that it will be soon.

And Del. Phillip Hamilton, R-Newport News, noted relentless daily increases in gasoline prices.

``If that trend continues into the fall and it rolls over into home heating fuel and natural gas ... any light that might have been shining on consumer confidence, I think, is going to get snuffed out pretty quickly,‘’ he said.

Fuel prices are part of the matrix that affects consumer spending, but other factors such as the cost of credit and fear of job loss also affect it, Brown replied.

``Taken as a single element, though, the rise in energy costs, that is not a good thing. It will consume available household income,‘’ he said.

Later, the state’s Superintendent of Public Instruction, Patricia Wright, got a bipartisan grilling from legislators unhappy with a proposal to drop social science and history from the state’s Standards of Learning testing.

``Once you start chipping at that, there is the real feeling that it will be on the back burner,‘’ said Cox, who teaches the curriculum at the high school level.

Del. Onzlee Ware, D-Roanoke, said it was important from his perspective as a history major and a black lawmaker that history instruction not be diminished. He said black children, in particular, need a truthful backgrounding on the role of slavery in America.