WASHINGTON - Virginia Gov. Timothy Kaine announced yesterday that officials will tap about $400 million from the state's rainy-day fund and plan to issue $250 million of tax-exempt bonds to help plug a more than $2.5 billion revenue shortfall in the state's $77 billion biennial budget
The state is one of many struggling to deal with revenue shortfalls stemming from the deteriorating national economy.
"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," Kaine said in a statement. "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 revised revenue forecast projects a shortfall of $973.6 million for fiscal 2009 and about $1.54 billion for fiscal 2010. Kaine said he will balance the fiscal 2009 budget through state agency cuts and spending reductions of more than $348 million, in addition to tapping the revenue stabilization fund and issuing more bonds.
The governor also said he will eliminate more than 570 jobs, not fill about 800 vacant jobs, and postpone a 2% raise for employees to next summer from November to help close the gap. Kaine is expected during the next few months to announce more layoffs and structural changes to agencies to address the $1.54 billion shortfall in fiscal 2010, according to the statement.
"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," Kaine said.
The governor's proposal includes issuing about $250 million of bonds to cover the costs of capital projects instead of using general funds, Finance Secretary Ric Brown said yesterday.
The bonds would finance various projects over several years, but officials have yet to identify them, he added.
"We've gone through that list and we're going to have to do some more due diligence to get a project-by-project list finalized," Brown said.
He said the additional bonds would be issued through a state public authority, such as the Virginia Public Building Authority or the Virginia College Public Building Authority, because all general obligation bonds need voter approval.
The governor's proposal for new bonds and tapping the rainy-day fund, however, needs to be approved by the General Assembly.
Brown said Kaine and finance officials will submit a bill to lawmakers before they return to regular session in early January.
He added that while the current market conditions are worrisome, he hopes they will improve by the time any of the new bonds would be issued, probably in the spring.