Lawmakers Focus on Budget

VHCA (11/20/2009)

Virginia lawmakers will have a $3.5 billion hole to fill in the next two-year budget as well an estimated $209 million shortfall in the current spending plan.  The 2010-2012 budget is expected to fall approximately $600 million short in revenues and include about $2.9 billion in additional spending, according to information presented during this week’s Senate Finance Committee retreat. The current budget outlook is being called the longest and deepest economic downturn since the Depression.

The increased spending is primarily for the Medicaid program, which would require an additional $1.8 billion to replace federal stimulus money used in the current state budget to run the program as well as anticipated growth and demand for services.

Earlier this week, Virginia House Appropriations Committee members heard similar bleak news with even higher estimates for the budget shortfall for the fiscal year ending June 30, 2010.  Delegates were given estimates of an additional $250 million to $300 million shortfall for the current budget period.  These additional shortfall amounts are on top of the $1.3 billion revenue shortage predicted in August and bring total revenues down from earlier forecasts by more than $6 billion since March 2007.

Delegate Lacey E. Putney, Chairman of the House Appropriations Committee, made it clear that he would not tolerate a tax increase adding that he wants members of the House to propose reducing or eliminating specific programs.

Total state revenues fell 8 percent in October compared with the October 2008 total, a memorandum by state Secretary of Finance Richard D. Brown said.  In the first four months of this fiscal year, which began in July, they are down 7.6 percent.

House Appropriations staff director Robert Vaughn warned that the task before the budget writers will not be easy reminding them that all low-hanging fruit was picked long ago.  Vaughn added that the standard option of level funding or freezing programs will not be sufficient to close the current budget gap. He projected a 3.8 percent growth in general-fund revenues in fiscal 2011 and a 5.3 percent growth in fiscal 2012. These are well below historic growth rates.

Budget-reduction strategies suggested by Vaughn include across-the-board cuts of 15 percent at state agencies. Governor Kaine reduced some, but not all, state agencies by 10 percent in August. In health and human resources, this would reduce local services to 5,834 mentally disabled clients and reduce 426 direct care staff at mental health hospitals, he said.