Local
Va. economists: Shortfall could explode to $2.9 billion
By: William C. Flook
Examiner Staff Writer
September 24, 2008
Virginia's two-year shortfall could balloon to as much as $2.9 billion if the economy continues to decline, state economists said Tuesday, the worst in a series of already bleak projections for state finances.
The Department of Taxation told Gov. Tim Kaine’s economic advisers that the state's $77 billion biennial budget will be thrown out of balance by at least $2 billion, a shortfall driven almost entirely by plodding growth in payroll and sales taxes. That figure could expand by nearly $1 billion in a worst-case-scenario, according to the agency's report.
The Department of Taxation predicted a stagnant Virginia economy through the current fiscal year, which ends in June 2009, as the fallout from the housing meltdown continues to constrain employment and consumer spending.
Kaine, who has already told agencies to draw up plans for cutting their budgets by as much as 15 percent, said he will roll out official revenue figures and his plan for spending cuts in early October.
"We don't crank up the printing press, or blow debt out, or put this on the shoulders of our kids and grandkids as is done at other levels, we are always about balance," Kaine said, taking a potshot at federal deficit spending.
Virginia’s Constitution requires the state to have a balanced budget.
Legislators as recently as last month thought the budget shortfall might reach $1 billion through 2010.
Del. Phil Hamilton, R-Newport News, a member of the House Appropriations Committee, says a nearly $3 billion shortfall is "a possibility," but expects the figure to be smaller.
He said legislators may look to the state's "rainy day" reserve fund to help close the gap, but cautioned that line-by-line analysis of expenditures will be necessary "to see if that spending is addressing a core service of state government."
"This is not a budget that we can just do with the rainy day fund or gimmicks," he said. "I think we're going to have to seriously restrict the spending plan that we passed last session."
The Department of Taxation told Gov. Tim Kaine’s economic advisers that the state's $77 billion biennial budget will be thrown out of balance by at least $2 billion, a shortfall driven almost entirely by plodding growth in payroll and sales taxes. That figure could expand by nearly $1 billion in a worst-case-scenario, according to the agency's report.
The Department of Taxation predicted a stagnant Virginia economy through the current fiscal year, which ends in June 2009, as the fallout from the housing meltdown continues to constrain employment and consumer spending.
Kaine, who has already told agencies to draw up plans for cutting their budgets by as much as 15 percent, said he will roll out official revenue figures and his plan for spending cuts in early October.
"We don't crank up the printing press, or blow debt out, or put this on the shoulders of our kids and grandkids as is done at other levels, we are always about balance," Kaine said, taking a potshot at federal deficit spending.
Virginia’s Constitution requires the state to have a balanced budget.
Legislators as recently as last month thought the budget shortfall might reach $1 billion through 2010.
Del. Phil Hamilton, R-Newport News, a member of the House Appropriations Committee, says a nearly $3 billion shortfall is "a possibility," but expects the figure to be smaller.
He said legislators may look to the state's "rainy day" reserve fund to help close the gap, but cautioned that line-by-line analysis of expenditures will be necessary "to see if that spending is addressing a core service of state government."
"This is not a budget that we can just do with the rainy day fund or gimmicks," he said. "I think we're going to have to seriously restrict the spending plan that we passed last session."
