Virginia’s tax revenues are expected to fall between $700 million and $1.5 billion short of projections this fiscal year, Gov. Tim Kaine said Wednesday, setting the stage for another painful round of budget cuts to state services and payrolls.
Kaine told reporters of the new informal estimates of the shortfall after meeting with an advisory council of legislators, finance staff and business leaders that will help formulate an official revenue re-forecast later this month. The grim figures, though preliminary, show pessimism that bright spots in the housing market and other sectors in the economy will translate into a reprieve for state finances.
Kaine had already ordered agencies to reduce their bottom lines by as much as 15 percent in anticipation of falling revenues. The commonwealth’s tax receipts shrank 9 percent last fiscal year, which ended June 30, over the previous one, “the most significant decline we’ve seen in recorded Virginia budget history,” the governor said.
Kaine did hasten to note, however, that Virginia hasn’t resorted to drastic measures in any of its recent rounds of budget cuts. He said his administration hasn’t, for example, missed a paycheck to state employees, been late on vendor payments or mandated statewide furloughs.
Del. Phil Hamilton, R-Newport News, said he expected the fiscal 2010 revenue drop to end up on the higher end, closer to $1.5 billion.
Worse, when legislators return to Richmond in January to draft the two-year budget for fiscal 2011-2012, he expects a shortfall of at least $4 billion. Virginia derives the bulk of its general fund budget from payroll and sales taxes, two sectors that have taken a beating as unemployment grows and consumer spending shrinks.
The commonwealth’s unemployment rate rose to 7.3 percent in June, non-seasonally adjusted, a more than 3 percent increase from the same period last year.
“The people are not exuding great confidence in the economy,” Hamilton said. “Everybody’s hunkered down. If they have any discretionary income, they’re holding on to it.”
