Kaine to begin balancing budget Wednesday at Capitol

RICHMOND

It won't be good news Wednesday when Gov. Timothy M. Kaine proposes steps to balance the recession-racked $76 billion state budget.

Cuts to education and health programs, and layoffs of state employees are expected to be part of Kaine's plan to adjust for a shortfall of at least $2.8 billion in revenues needed to pay for programs.

Kaine repeatedly has stressed this fall that "everything is on the table" when it comes to cutting spending. But the governor has been mostly mum when asked to identify specific targets for his budget ax.

That will change Wednesday morning when Kaine lays out his plan before a joint session of the General Assembly's money committees. Lawmakers will take up Kaine's proposals when they convene Jan. 14 for a six-week session. Virginia, unlike the federal government, is required by its Constitution to keep its budget balanced each year.

The first step in the budget deliberations will be for all sides to agree on the size of the shortfall.

Computations from Kaine and his economic advisers put it at about $2.8 billion - slightly more than Virginia spends every year on public safety, including operating prisons and the State Police Department.

The House Appropriations Committee has said Virginia may be facing a $3.5 billion hole; the Senate Finance Committee thinks the revenues are $3.2 billion shy.

Kaine, in an August speech to the money committees, ruled out raising taxes to solve the budget problems.

The governor revealed part of his plan in October when he proposed withdrawing $400 million from the state's rainy-day fund and borrowing money for $250 million in construction projects that lawmakers wanted to pay for in cash.

Kaine, a Democrat, also ordered $348 million in emergency cuts in state expenditures, including pay raises of 4 percent for state employees and 2 percent for teachers.

Officials at the Virginia Education Association, which has long lobbied for raising teacher's pay, have lowered their expectations for next year.

"There aren't going to be any raises," said Robley Jones, a lobbyist for the group. "Our real battle this time, unfortunately, is to keep to education from being cut."

Kaine and several legislators have suggested school funding may not be spared.

"Public education is 34 percent of our budget," said Del. Phil Hamilton, R-Newport News, a senior House budget writer. "I don't know how you can make the reductions we need to make and not look at everything."

Local governments depend on the state to finance about 40 percent of their costs of running schools. If less money is passed down, Hamilton said, the state should allow each locality to determine how to trim its spending.

In South Hampton Roads, city and school officials are already facing potential losses in local tax revenues because of a slowed economy.

Kaine has said he will not propose across-the-board cuts to all state spending, arguing such an approach could harm highly effective programs. He has promised to use a "targeted" approach in proposing reductions.

The choices will not be easy. Medicaid has long been one of the fastest-growing parts of the state budget. Many lawmakers say, however, that it would be wrong to scale back on public health care and social services during a recession that is causing more people to rely on those programs.

Despite the gloom, Kaine has suggested he may propose a few low-cost initiatives to make Virginia more energy-efficient and environmentally friendly. Kaine has been considering proposals to increase tax credits for consumers who buy energy-efficient appliances, and to provide incentives to spur production of biofuels.

"There isn't any reason, when times are tough, just to kind of retrench," Kaine said last week. "We ought to be looking to innovate. And I want to make the last year of my governor's term very focused on energy and the environment."

Warren Fiske, (804) 697-1565, warren.fiske@pilotonline.com