Va. budget gap stands at $300 million

The state's revenue numbers from May are in, and things are worse than officials thought they would be.

Based on the month's revenues — which fell 15.6 percent compared with the same month last year — Virginia's forecast budget gap widened another $75 million, for a total of $300 million for fiscal year 2009, which ends June 30.

Gov. Timothy M. Kaine tempered the tepid financials by saying that the state will bridge the gap with the cost-cutting measures already in place — and the use of about $109 million in federal stimulus funding and $49 million in unallocated budget surplus from the two-year, $77 billion spending plan for fiscal 2009-2010.

The governor also said no additional layoffs of state employees will be necessary.

"We will be able to manage this," he said.

Heading into the second year of the two-year budget without additional stimulus money or a budget cushion, however, could pose a formidable challenge to the administration, which briefs the Appropriations Committee of the House of Delegates this morning.

"As we look at 2010, we're going to really have to be diligent and creative," Kaine said during a briefing at his office at the state Capitol in Richmond.

Kaine said the 19-month recession and recent revenue downturn persuaded him to immediately begin the process of reforecasting the revenues upon which the second half of the budget is based. The governor said it is important to give state lawmakers an earlier financial picture of what needs to be done well in advance of his annual Aug. 15 address to the General Assembly's money committees.

The governor said he is committed to balancing the 2010 portion of the budget and writing the 2011-2012 budget without a tax increase.

"We've managed this with no general-fund increase, and I don't see any likely proposal we're going to make to change that," he said.

Secretary of Finance Richard D. Brown said money the state received in May from retail sales taxes and non-withholding income taxes continued to fall below previous estimates. Meanwhile, the state has paid out about $200 million more in income tax refunds than it did through May 2008, adding to its financial woes.

Last fall, the administration reforecast its revenues for fiscal year 2009 and projected a 7.3 percent decline. The latest figures show that revenues have declined by 9.3 percent.

Yesterday, however, Kaine said he thinks the hardest economic decisions are behind the state.

He noted that the state's unemployment rate of 6.8 percent remained flat in May and was still lower than 35 other states in the nation. He said there are signs the housing industry is beginning to pick up and pointed to the impact of federal stimulus funds aimed at jumpstarting the economy.

"I know what's happening in state budgets across the U.S., and I wouldn't trade places with any of them," he said. "I think the most difficult decisions we've made are in the rearview mirror."