Needless to say, this (after the "flip," see Gov. Kaine's press release on the huge new revenue shortfall facing Virginia) is not good news. It's not just Virginia, of course; these budget problems are happening in states all over the country, thanks in large part to the disaster known as the "Bush-Cheney-McCain economy." Overall, Gov. Kaine's measures seem fairly prudent. However, I've got to ask again as I have before: at this time of pain and sacrifice, why aren't the rich being asked to do their share? Why are only the poor, working and middle classes - who will be adversely affected by the loss of state services - being asked to bear the burden? That's not right, and it's certainly not progressive.
For instance, how about reinstating the tax on estates above...I don't know, let's say John McCain's definition of "rich" (what did he say, $5 million?). Ha. Seriously, though, if "everything's on the table," then where's the revenue side of the equation here, specifically asking wealthy corporations and individuals to sacrifice a bit more at this time when so many working Virginians are getting pounded by economic problems?
Politically, it's hard to say how this will play out exactly in 2009. One thing's almost certain: the Virginia General Assembly session this spring will not be any fun at all, unless you like watching car wrecks and natural disasters. Also, it will be fascinating to watch the various candidates for 2009 and the various political tacks they take regarding this mess (and who's most responsible).
Finally, I can't help but compare and contrast 2009 to 2005, when Tim Kaine ran as "Mark Warner Part II." Of course, this situation is FAR from being all Governor Kaine's fault by any stretch of the imagination (I largely blame circumstances outside anyone's control - namely, the economic meltdown - plus the Republican flat-earthers in the House of Delegates who refuse to raise necessary revenues). Still, I wonder who (if anyone) will be eager to run as "Tim Kaine Part II" next year. Will we have a bunch of "outsiders" running against "Richmond," just as everyone at the federal level seems to be running against Washington these days? It certainly will be interesting to watch.
GOVERNOR KAINE ANNOUNCES REVENUE REFORECAST, PLAN TO ADDRESS FISCAL YEAR 2009 SHORTFALL~ Shortfall for the biennium just over $2.5 billion ~
~ Reductions, bonds, Stabilization Fund to meet FY 2009 shortfall ~
RICHMOND - Governor Timothy M. Kaine today announced the official revenue reforecast, and immediately announced an executive spending reduction plan to meet the fiscal year 2009 shortfall. The Governor's plan reduces government spending by making operations more efficient and reducing the scope of some government programs, while protecting K-12 education and other critical government functions, like public safety. The cuts include reductions in the Governor's office and residence budgets, previously announced.
"Since October of last year, the continuing uncertainty and downturn in the national economy has required us to adjust the revenue forecast downward twice, and thus far, we've reduced the state budget by over $1.7 billion, not including the reductions we're making today," Governor Kaine said. "Just like families and businesses, state government is feeling the effects of the national economic crisis. And just like Virginia families and businesses, we're going to have to reduce our spending to make ends meet."
The official revenue reforecast projects a shortfall of $973.6 million for fiscal year 2009 and $1.54 billion for fiscal year 2010, or just over $2.5 billion for the biennium. Governor Kaine will balance the FY 2009 budget through state agency savings and spending reductions of over $348 million and additional steps, including a withdrawal of about $400 million from the Revenue Stabilization Fund.
The revised revenue estimate is based on a series of meetings the Governor and his Secretary of Finance held with economists, critical industry leaders, and legislative leaders of both parties.
The new forecast predicts a decline in the general fund budget for fiscal year 2009 of 4.0%, and very slow growth - of 3.6% - as the recovery begins in fiscal year 2010.
In anticipation of this shortfall, on September 2nd, the Governor directed his Cabinet secretaries to work with their respective agencies to develop a range of possible spending reductions. This action enabled the Governor to order immediate reductions in spending upon completion of the revenue reforecasting process.
The Governor's savings actions include
-+ recovering over $40 million in balances from fiscal year 2008;
-+ capturing savings of over $24 million resulting from Governor's directives to agencies in August to immediately implement a hiring freeze and cuts in discretionary spending; and
-+ reducing agency spending by over $323 million, based primarily on the recommendations made by state agencies in their 5, 10, and 15 percent reduction strategies, including the delay of the planned 2% state employee salary increase.
The Governor's reduction strategies include
-+ $100 million in improved business practices and efficiencies
-+ nearly $32 million in the reduction or elimination of current services
-+ over $27 million in reduced personnel costs
-+ over $13 million in reduced discretionary expenses
For example, the Department of Forestry will save $50,000 by sharing the cost of a hydrologist with Virginia Tech; the Science Museum will save $100,000 by closing for an additional day each week; the Department of Taxation will save over $1.7 million by reducing technology costs; and the Department of Mental Health, Mental Retardation, and Substance Abuse services will save over $2 million by consolidating certain targeted administrative services regionally for their mental health treatment centers.
Governor Kaine will propose addressing the remaining portion of the $973.6 million shortfall through bonding nearly $250 million in capital outlay that had been planned for cash payments and through a withdrawal of around $400 million from the Revenue Stabilization Fund, which currently holds over $1 billion. These actions must be approved by the General Assembly.
Use of the Revenue Stabilization Fund in fiscal year 2009 enables state leaders to protect certain critical services from 2009 cuts, most prominently, K-12 education.
"While no agency can expect complete exemption from cuts, it is important to protect crucial state services as much as possible," said Governor Kaine. "By employing the Revenue Stabilization Fund, we can avoid fiscal year 2009 cuts in K-12 education. This action avoids a devastating impact on classrooms with the school year already underway."
Major actions in the Governor's announced fiscal year 2009 reduction plan include:
* About 570 layoffs, the elimination of more than 800 additional positions that are currently unfilled, holding about one-third of all at-will positions vacant, and the imposition of a continued freeze on new hiring.
* The delay of a previously planned 2% salary increase for state employees, to July 2009 from November 2008.
* Reductions of 5 or 7 percent to institutions of higher education.
* Administrative efficiencies in Medicaid, the Department of Aging, and Community Service Boards that will prevent deeper cuts in direct service delivery.
* Restructuring Department of Corrections facilities, closing several older facilities.
* Previously announced reductions in the Governor's office and mansion budget, including a continued reduction in the Governor's own salary."I know that the layoffs associated with these cuts come at a challenging time for state employees, and I regret that they are necessary," Governor Kaine said. "I have instructed the Virginia Employment Commission and our Human Resources Department to help those state employees who are laid off through this difficult transition."
The Governor noted that some strategies, like delaying the 2% state employee raises, would be reconsidered as further reductions for 2010 are considered. Reductions to address the $1.54 billion shortfall in fiscal year 2010 will be announced in the coming months and are expected to include further layoffs and structural changes.
"The shortfall for 2010 is projected to be even greater, and while I will work to protect items like employee raises, we must keep open the possibility that they may have to be eliminated altogether as we make additional reductions," said Governor Kaine. "We will continue to examine every government expenditure for performance and efficiency, but we will have to look at new ways of doing things and ask ourselves hard questions about all of our programs."
"No one would wish for a crisis like this, and as we move forward, there will be more difficult choices to make," the Governor continued. "But we should embrace the opportunity to critically evaluate how we're spending taxpayer money, and whether every program is delivering the results people deserve."
The Governor's reduction plan can be found here.
Graduation is in May and I'm getting more and more depressed.
Senator Deeds' Statement on the Governor's Revenue Reforecast and Budget Reduction Announcement
RICHMOND - Senator R. Creigh Deeds released the following statement today in response to the Governor's revenue reforecast and budget reduction announcement:
"A quick glance at recent headlines makes it clear that our national and global economies are in trouble. Because of the responsible fiscal stewardship of Governor Kaine, Virginia has been able to forge ahead in these difficult times. However, the Commonwealth is not immune from these national economic challenges.
"I applaud the Governor for his prudent management of the state budget and urge my colleagues in the General Assembly to continue working with his administration in a bi-partisan fashion to get through this economic downturn. His leadership stands in marked contrast to the failures of the administration in Washington to shepherd our economy through these challenges.
"But make no mistake: despite Governor Kaine's responsible approach, much work remains to ensure our fiscal house stays in order. We can't allow partisanship and inside-the-beltway gimmicks to turn back the progress started under Governor Mark Warner and continued in the Kaine administration to reform our budget and fund important priorities. The Governor has taken the first step of proposing responsible reductions in state spending--including within his own office, salary, and the executive mansion. The legislature must not shirk our responsibility and consider this a problem to be avoided; this is a challenge that, working together, we can use as an opportunity to ensure the fiscal stability of our state budget for generations to come."