Virginia Gov. Bob McDonnell on Thursday ordered agency heads to identify ways to cut their budgets by up to 6 percent next year.
Though there are signs that the state’s budget woes may be bottoming out, McDonnell’s chief of staff, Martin Kent, warned agency heads and Cabinet secretaries that economic uncertainty could require additional cuts in the 2012 fiscal year. He asked them to prepare contingency plans for 2 percent, 4 percent and 6 percent cuts.
The state’s expenses are growing in part because the sluggish economy prompted more people to turn to the publicly funded Medicaid program for health care. McDonnell also has spending priorities tied to future growth such as job creation, economic development, higher education and transportation, Kent wrote.
“It is important to remember that the extent of the budgetary savings needed is not fully known at this time; therefore, we must anticipate and prepare for the maximum amount of the potential need,” Kent wrote.
The memo asks the agency heads to identify services that could be better performed by the private sector at a time when the governor’s highly touted plan to privatize state-run liquor stores hangs in limbo. Lawmakers balked at the plan after projections showed it would cost the state $47 million a year in lost revenue.
The privatization plan was among a number of government reform recommendations submitted to the governor last week by his hand-picked commission. McDonnell wanted to call a special session on the matter and other reform proposals in November, but said he would only do so if he had the votes to pass it.
Virginia already cut $4 billion out of its budget this past General Assembly session. Revenue collections have increased from the previous year six out of the last seven months, but still lagged the year-to-date forecast in September, Kent said.
The final budget contingency plans are due by Nov. 5. McDonnell is scheduled to present his budget plan to the joint money committees of the General Assembly on Dec. 17.
