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Governor Announces Initial Wave of Budget Cuts; Deeper Cuts Expected in January


As anticipated, Gov. Tim Kaine announced significant budget cuts last week, responding to a projected $2.5 billion deficit that could grow to a whopping $3 billion by the end of 2007.  Tax revenues for the current fiscal year have fallen four percent short of estimated levels -- a reflection of the economic slowdown.  The Governor’s mid-course budget adjustments trimmed approximately $324 million across nearly all agencies and program areas.  The size of state government was also scaled – 570 state employees were laid off and 870 additional positions will go unfilled.  A planned two percent pay raise for state employees was also postponed.  Yet, the administration claims that a $400 million withdrawal from the state’s “rainy day” fund will still be necessary to protect K-12 education and mental health programs from immediate cuts.  General Assembly members responded with a reserved acceptance and voiced a spirit of cooperation, promising to work together with the Governor to balance the state’s biennial spending plan.  All programs and spending areas are expected to face the chopping block next year when the legislature returns to session.  House leadership was quick, however, to take tax increases off the table during the economic downturn.  For the time-being, Governor Kaine has expressed agreement with that philosophy.  The budget shortfall promises to be the defining issue of the 2009 General Assembly session.  Special interest groups and state agencies are bracing to defend against their respective oxes being gored and what little hope existed previously for long-overdue investment in the Commonwealth’s transportation infrastructure has been further depleted.