Governor: Difficult Cuts Ahead

VHCA (8/22/2008)

On Monday of this week, Governor Tim Kaine opened his presentation of the end-of-year report on the Commonwealth's economic and fiscal performance by announcing that this report “is far more challenging than my previous reports”.

In his report to a combined meeting of the General Assembly money committees, the Governor reminded legislators that the national economy is continuing to slow, which will necessitate a reforecast this fall and the likely need for more budget cuts.  In addition to announcing that he had already asked state agencies to curtail hiring and discretionary spending, Kaine warned that Virginia “will likely have to go further in the coming months to address slowing revenues”.

The Governor, followed by recently appointed Secretary of Finance Ric Brown, highlighted for legislators a series of weakening economic indicators including double-digit declines in home sales, lower than anticipated payroll withholdings, falling sales tax collections and significantly lower corporate profits.  In September, both the Governor’s Board of Economist and his Advisory Council on Revenue Estimates will meet to update forecasts as the Administration prepares for the upcoming 2009 General Assembly session.

The Governor reminded the combined committees that while the Commonwealth was listed as having the 5th highest per capita income in the country, Virginia’s spending per capita is 36th in the nation.  He continued his message by highlighting the fact that the relatively low per capita spending for government services in Virginia is a measure of efficiency, but also points out that sizable cuts will be harder to find.

Governor Kaine remarked that his Administration 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”. The Governor shared that all programs - including those previously held harmless - and all available strategies will be on the table for review.

At the conclusion of the Governor’s remarks, legislators did little to hide their apprehension during Secretary Brown’s detail review of the revenue and budget outlook.  A common theme among comments from Republican legislators focused on the need to react more quickly in a declining economic environment.

The challenge before providers of long term care, especially those that rely heavily on adequate funding of Medicaid-financed care, is to convince both the Administration and legislators that further Medicaid cuts will significantly impact the delivery of high-quality services across the Commonwealth.  Information provided by VHCA member facilities for the period ended June 30, 2008 show that operating costs are climbing at an annual rate of 5.1% contrasted with an average Medicaid payment rate adjustment of just 1.4% following the 2008 budget cuts.  VHCA staff is now meeting with key legislators to communicate this critical message. 

We ask that VHCA members work to strengthen relationships with legislators in their districts.  Information contained in a recent VHCA presentation to the General Assembly’s Joint Commission on Health Care may be helpful as you reach out to these individuals.  The full text of the Governor’s speech is available as well as the report given by Secretary Brown.