WASHINGTON -Virginia Gov. Timothy Kaine said yesterday that he will detail major downward tax revenue revisions, leading to budget cuts in fiscal 2009 and 2010, for legislators by early October as tax revenue collections have slowed significantly and are expected to continue to weaken.
Sources have said that lower-than-expected tax revenues are expected to contribute to a budget shortfall that could reach more than $1 billion over fiscal 2009 and 2010. This comes after Kaine has already reduced revenue estimates by $2 billion for fiscal 2008, 2009, and 2010.
Kaine and newly appointed Secretary of Finance Ric Brown told a joint meeting of the state's House Appropriations Committee, House Finance Committee, and Senate Finance Committee yesterday that they have begun the process of finding ways to address the shortfall and will have revised revenue estimates to the legislature in early October.
The state's two general fund revenue sources most closely tied to the economy - payroll withholding and retail sales taxes - have experienced a significant slowdown in growth during the second half of this fiscal year, which ended June 30
Sales tax collections grew at an average rate of only 0.8% during the last four months of fiscal 2008. To make the fiscal 2009 forecast, the rate would have to grow to 4.9% during fiscal 2009, according to Kaine. Income tax withholding grew at an average rate of 1.6% during the same four-month period, and would have to grow at 6.4% to make the 2009 forecast.
Kaine also said that, because Virginians are buying fewer cars and driving fewer miles, motor vehicle tax and gas tax collections are also down and will require downward adjustments. The Commonwealth Transportation Board recently reduced its proposed six-year plan expenditures by $1.1 billion and moved money from the state's construction fund to the maintenance fund, reducing new construction by more than 40%, Kaine said.
He said the budget reductions will mean that all programs will need to be considered for cuts. The governor has already asked state agencies to scale back spending and limit filling vacant positions.