Virginia lawmakers, once they close a $641 million revenue shortfall in the state’s current budget, likely will have to tackle a similar problem in next year’s spending plan.
A slumping housing market and climbing energy prices will limit state revenue growth in fiscal year 2009, creating a shortfall of at least $50 million to $150 million in the budget that takes effect July 1, according to research conducted by the House Appropriations Committee.
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The findings, presented to lawmakers last week, assume state spending increases just enough to cover crucial services, such as an expected $1.1 billion jump in constitutionally mandated education aid and hundreds of millions of dollars in health care costs.
Committee aides assumed spending would not increase in fiscal 2009 as much as it did this year; otherwise, the shortfall would be much higher.
The research includes economic estimates showing that the conditions that caused the existing shortfall and the projected problem are short-term difficulties.
Those conditions are not expected to send the state into a recession or force painful spending reductions.
“The challenge will not be solely to balance fiscal year 2008, rather the challenge will be to take the necessary steps to balance the budget and generate sufficient cash balances that can flow into fiscal year 2009,” said Del. Vincent Callahan, R-McLean, the Appropriations chairman who is retiring this year after four decades in the legislature.
Even if the projected shortfall reaches $150 million, the fiscal fissure represents a relatively small portion of state spending — the two-year budget that expires June 30 totals $73.8 billion — but it severely limits the abilities of Gov. Tim Kaine and lawmakers to add new initiatives.
Kaine, who will outline his budget proposals next month, is expected to seek millions of dollars to expand state-funded preschool programs and to improve the state’s mental health system in response to April’s shootings at Virginia Tech.
“State revenues have slowed as the national economy cools off, but we must still innovate to move ahead,” Kaine said Tuesday in a Thanksgiving e-mail to supporters.
“I am particularly interested in further expansions of early childhood education and reforms to our mental health system…. The tragic events at Virginia Tech in April showed us that we must have more effective community mental health services.”
Republicans, who control the House and dominate the Appropriations Committee, are skeptical of Kaine’s preschool plan but want to find funding for mental health services and reduce spending elsewhere in the budget.
