The Kaine administration on Tuesday told agency directors to draw up plans for how they would cut costs by as much as 15 percent, signaling that state officials expect severe budget cuts due to the sagging economy.
Kaine Chief of Staff Wayne Turnage ordered the agency heads to prepare strategies to reduce their budgets by 5, 10 and 15 percent for each of the next two fiscal years. The highest figure, Turnage wrote in a memo, is the most Gov. Tim Kaine can carry out under his executive authority.
While not explicitly mandating the cuts, the memo is a further indication that the Kaine administration is bracing for the worst when the dismal performance of state revenues becomes clearer in the fall.
Two critical cash streams — sales and payroll taxes — have come in far less than expected in recent months. While Kaine has declined to speculate on how large of a shortfall the deficit will cause in the $77 billion biennial budget, some legislators say the state may need to close more than a $1 billion gap.
“I know this is not the kind of news that you were hoping to receive this fall about the budget,” Turnage wrote, citing the $2 billion worth of spending reductions already made by the General Assembly this year.
“As we start this next round of cuts, it is clear that the choices will be even more difficult,” he wrote.
Turnage asked agency heads to look in particular “at areas where our costs outstrip national norms.” He urged targeted cuts over across-the-board reductions.
“We will continue to do all we can to protect core services, but the need for tough decisions will require examination of all areas of state spending,” he wrote.
The Kaine administration in July spelled out freezes on all but the most crucial hires, travel and contracting, and warned that layoffs could be coming.
The commonwealth ended fiscal 2008 in June with a scant $5.4 million left over in its general fund. In the last four months of that fiscal year, sales tax grew at an average rate of 0.8 percent and payroll tax grew at an average 1.6 percent.
An official revenue reforecast is expected in early October.
