Virginia Gov. Tim Kaine has told state agency chiefs to squeeze their already pared-down budgets to counter an unexpectedly bad drop in tax revenue, the governor confirmed Monday.
Revenue for the current fiscal year is expected to plummet an additional 1.5 percent beyond the 7.3 drop predicted earlier this year, Kaine told reporters in Richmond, translating to about an $225 million shortfall.
The fiscal 2009 tax data, which won’t be complete until the end of June, is discouraging news for a state government that has endured round after round of belt-tightening and hundreds of layoffs.
The General Assembly closed a $3.7 billion gap in its $77 billion biennial budget earlier this year, partly through an injection of federal stimulus funds.
The agency cuts will be a similar exercise to measures ordered by Kaine in 2007 and 2008. He said he told agencies “if there is any way that they can underspend between now and the end of the year, that would be great.” The governor said he hasn’t told directors how much to cut.
The blow to revenue is cushioned by a $160 million reserve left over in Virginia’s budget. And Kaine spoke optimistically about signs that suggest the housing market could be primed to rebound.
“We’re seeing some positive signs, but it’s not yet a trend, so we’re just going to have to be pretty austere in what we do,” Kaine said.
Virginia builds most of its general fund budget on payroll and sales tax dollars, two sources of revenue that have shown deep declines as unemployment rises across the state. Some of the worst-hit areas of the commonwealth now face double-digit jobless rates.
Statewide, Virginia hit a 7 percent seasonally unadjusted unemployment rate in March, nearly twice the rate from a year before, according to the Virginia Employment Commission.
