Gov. Kaine proposes $2.5 billion in cuts to state spending

RICHMOND

Faced with the fallout from a weak economy, Gov. Timothy M. Kaine on Thursday proposed cutting $2.5 billion from the state’s two-year budget, which he said would mean pink slips for about 570 state workers.

Another 800 vacant state jobs would remain unfilled, and the rest of the state work force of about 110,000 would not get a 2 percent pay raise in November as planned.

Kaine’s plan also calls for closing several older prisons, cutting 5 percent to 7 percent of public college funding, and trimming expenses at many agencies, including those providing a range of medical, aging and mental health services.

The cuts are needed, Kaine says, because of the effects of the national economic crisis on the state’s $77 billion budget.

One glaring indicator of overall market conditions in Virginia is weaker than expected tax collections, such as sales and income tax revenues.

Because money isn’t pouring in at the projected rate, the state budget is suffering, squeezed by the same economic factors as businesses and families, Kaine said Thursday afternoon as he laid out his cost-cutting plan.

Calling the task “painful and challenging,” the governor said his package of spending reductions and money-management proposals would plug a $974 million hole in the current fiscal year.

Beyond layoffs and other cost-saving measures, Kaine would withdraw $400 million from the state rainy day fund, a reserve account used in certain conditions to balance the budget.

He would also borrow $250 million for state projects that otherwise would be paid for with cash, freeing that money for other uses.

Reacting to the plan, Republicans generally struck a moderate tone Thursday, though some questioned Kaine’s reliance on the state savings account to help fix the budget.

“The governor is doing what needs to be done,” Del. Chris Jones, R-Suffolk, said in a telephone conversation. “These are difficult times for Virginia families, and we need to tighten our belts and live within our means, too.”

Jones called back minutes later to add that using the rainy day fund should be “a last resort.”

That phrase seemed to be the GOP talking point of the day, as an earlier e-mail statement from Del. Phillip Hamilton, R-Newport News, contained identical wording.

In a written statement pledging to work with Kaine, House Speaker Bill Howell, R-Stafford, noted that scrutinizing the budget presents opportunities for “trimming bureaucracy and rooting out unessential and wasteful spending.”

Many of the decisions will have to be hammered out by Kaine and legislators during the 2009 General Assembly session.

Virginia is among many states struggling to curb spending during the economic downturn. This is the second time in recent years that Kaine has had to make cuts – he cleaved $1.7 billion from the previous two-year plan – and take money from the state piggy bank to balance the budget.

And with each round, the pain becomes more acute.

This time, Kaine said, his priorities included protecting public education and keeping college tuition costs stable and financial aid available.

The governor also tried to spare local governments that likewise have been hit hard by the soft economy, though he warned that finding the additional $1.5 billion to be carved out of the second year of the biennial budget could be more difficult.

“Everything is going to be looked at,” he cautioned, later adding that tax increases are not part of his plan.

Long-term, another victim of the revenue shortfall may be the state’s already anemic funding for transportation projects.

Details of the governor’s plan for second-year cuts should be available by December.

Julian Walker, (804) 697-1564, julian.walker@pilotonline.com