Leading Republican legislators are unfazed by recent revenue projections revealing that Virginia could soon face a budget deficit.
“It’s something to be cognizant of,” House Speaker William Howell, R-Stafford, told The Examiner. “But I think everybody realizes the economy goes up and down.”
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Through April, Virginia’s revenues grew 3.6 percent, according to a May 11 report from Secretary of Finance Jody Wagner. That level of growth is well below the 6.5 percent General Assembly members expected when they approved the $73.8 billion biennial state operating budget.
If the trend continues, revenues for the fiscal year ending June 30 would be about $300 million below expectations.
The two-year budget, however, does not expire until June 30, 2008, which gives officials time to find savings to offset a shortfall.
Del. Vince Callahan, R-McLean, who is retiring after 40 years as a legislator, said the deficit could be limited to the current fiscal year. A key factor dampening income growth — a higher-than-normal amount of income tax refunds — could be a fluke, he said, adding that other core revenues such as the sales tax remain strong.
“We’ll know more in the summer,” said Callahan, who led the budget-writing House Appropriations Committee for the past seven years. “It’s only a problem if the economy slows down and it carries into the next fiscal year.”
Gov. Tim Kaine, after reading Wagner’s report, directed state agencies to monitor spending and conserve any surpluses as the fiscal year nears its conclusion. In addition, state financial officials will spend the next few months studying economic forecasts and trying to determine the significance of the problem.
If the high level of refunds is the chief reason for the slow growth, then budget cuts could be avoided.
Cuts may be necessary, however, if falling state revenues stem from a slumping economy that carries into the fiscal year beginning July 1. If budget changes are necessary, Callahan said, the decreases would represent a small fraction of the budget and would not be painful to the general public.
“There’s plenty of fat to trim,” he said.
