Gov. Kaine makes budget cuts

WSLS News Staff & AP
Published: October 9, 2008

Click here to read the Governor’s full plan

 

LOCAL CLOSINGS:

Pulaski Correctional Center - 62 layoffs

Chatham Diversion Center - 20 layoffs

VIRGINIA HIGHER EDUCATION CUTS

UVA - $10.6 million

VMI - $982,000

VT - $8.9 million, 3 layoffs

RU - $2.5 million

JMU - $5.4 million

VT Co-Op Extension - $2.3 million

VA Community Colleges - $19.9 million, 8 layoffs

Institute for Advanced Learning and Research - $623,558 (about 10% of total general fund money)

Roanoke Higher Education Authority - $131,839 (about 10% of total general fund money)

New College Institute (Martinsville) - $100,000

 

6:48 p.m.

By WSLS News Staff

10 On Your Side called Virginia Tech to see if the spending cuts would impact the post-April 16th security improvement projects.

Tech spokesman Mark Owczarski tells us Tech either already has money lined up for the security projects, or has already implemented them, so they will not be impacted.

Owczarski says the university learned about the amount of the spending cuts today, and they do not have a “short-list” of items that they may cut.  He says Tech leaders will meet in the coming days to discuss changes.  Owczarski adds that since Tech over-extended enrollment, they have a bit of a surplus from tuition money that was not budgeted for.

6:15 p.m.

By BOB LEWIS
AP Political Writer

RICHMOND, Va. (AP) - Gov. Timothy M. Kaine on Thursday ordered 570 state employee layoffs, cut college funding by at least 5 percent, ordered some older prisons closed and postponed state employee raises to deal with a $2.5 billion government fiscal crisis.
    The governor will also ask the General Assembly to approve about $250 million in debt for capital outlay projects now paid with cash and to withdraw about $400 million from the state “rainy day” cash reserves just to make ends meet in the current fiscal year.
    The austere round of cuts is the third imposed since last October and deepest in at least five years. They come amid a worsening global economy that Kaine acknowledged would probably force even more cuts in the next fiscal year.
    “We might decide as we see events play out here in the next month or two that for purposes of the decisions we make in the 2010 budget that we would cut expenses further, that we would go beyond the revenue estimate,“ Kaine said somberly at a news conference.
    “Nationally, we don’t know where the bottom is,“ Kaine said. “All we can do is make the real decisions in real time, not putting it off until later to keep this budget in balance and protect the services that are most critical.“
    Kaine projected that revenues for the current fiscal year which began in July would be about $973 million short of their targets. For the fiscal year that begins next summer, the shortfall is estimated at more than $1.5 billion.
    As dark as the Democratic governor’s forecast was, there were legislators who feared he may have been too optimistic.
    “I just don’t see it being $2.5 billion. I wish I did,“ said House Majority Whip Kirk Cox, R-Colonial Heights.
    Economists and advisers with whom Kaine met last month set the shortfall in a range from $2 billion to nearly $3 billion. Kaine split the difference, and Cox said Kaine observed “a very thoughtful process” to reach what seemed a reasonable figure.
    “But, boy, has the world changed in the last two weeks,“ he said. “I think he should have started at $3 billion and then see where it goes from there.“
    The steps Kaine announced Thursday deal only with the current fiscal year. He is leaving the more dire prospect of reconciling the fiscal 2010 shortfall for the amended budget he must submit to legislative money committees in December.
    Total agency spending reductions in Kaine’s newest directive would total about $323 million in savings. About $75 million will result from job cuts and layoffs, according to the administration.
    Virginia will save another $44.7 million by postponing until next July the 2-percent raises state workers were to receive next month.
    The layoffs shook the confidence of state employees in a government that will expect them to do more with less, said Bill Elwood, director of the 12,000-member Virginia Governmental Employees Association.
    “They will be expected to do so after a meager 2 percent raise was snatched from them at the last minute, a raise that was supposed to cover the cost of increased health insurance premiums that went into effect in July,“ Elwood said.
    The bulk of the layoffs, 330, come from the Department of Corrections, where Kaine is ordering six prisons closed, including the 70-year-old Southampton Correctional Center, a medium-security lockup for about 650 inmates about 70 miles south of Richmond. It is the largest of those to be shuttered, and among the oldest in the system. Kaine said he targeted those sites because they cost more to operate and need to be replaced.
    “When we have plans to build new institutions, why invest in old facilities ... to prop up a structure that needs to be replaced anyway?“ Kaine said. “By closing Southampton and demolishing it, we then have the site for the next prison.“
    Kaine’s actions project about $100 million of the savings from “improved business practices and efficiencies,“ including closing the Science Museum in Richmond for an additional day each week and $1.7 million in unspecified technology cost reductions by the Department of Taxation.
    Nearly $50 million would come from unspent cash balances some state agencies had left over from the 2008 budget, which expired June 30.
    Kaine largely spared cuts to state support for public schools from kindergarten through 12th grade for this year. He deferred them for a year because of the difficulty local school districts would have absorbing an unexpected drop in state funding in the midst of an academic year.
    “Things that we left untouched in ‘09, I need to point out will definitely be examined and are not going to be untouched in 2010,“ Kaine said.
    The Virginia Education Association, which represents 60,000 public school teachers statewide, immediately began pushing hard to escape next year’s cuts, proposing instead that taxes cut in recent years be reinstated. VEA president Kitty Boitnott advocated restoring the estate tax and and tax credits landowners receive for dedicating some of their property to permanent conservation purposes.

11:05 a.m.

Read the news release from the Governor’s Office below

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
• 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.”

—————-

Updated 7:06 a.m.

Gov. Timothy M. Kaine this morning plans to release his latest news on Virginia’s budget shortfall.

At an 11:00 a.m. announcement in Richmond, Kaine is expected to lower the state’s official revenue estimate by about $2.5 billion, meaning hundreds of millions in cuts are coming.

Kaine yesterday began the austerity moves by announcing $1.4 million in cuts to his office and residence. They range from layoffs to no longer providing bottled water.

—————————-

Pay raises would be delayed for state employees, who could lose them altogether should the economy continue to erode, under a Kaine administration budget-balancing plan that will cost some workers their jobs.

Fiscal experts said privately that a 2 percent increase in December will likely be pushed into next year, when another 2 percent raise is planned. Killing both raises would save $250 million.

Delacey Skinner, Gov. Timothy M. Kaine’s communications director, yesterday declined to comment.

Kaine this morning announces plans, including an indeterminate number of layoffs, to erase a cash shortfall projected to grow by $2.5 billion. That’s atop $2 billion that forced spending cuts earlier this year.

Kaine apparently views layoffs as generating fewer savings than program cuts. Severance pay, up to nine months for workers with 15 years or more service, reduces savings in the near term.

So far, there have been about 100 layoffs. Senior administration officials do not believe jobs will be eliminated on the scale sought by Gov. Mark R. Warner during the 2002 recession. Warner proposed to erase about 1,900 jobs.

Layoffs, however, could be reduced by keeping open vacant jobs.

Layoffs and delayed, or eliminated, pay raises will be of keen interest in the Richmond area, home to a large portion of the state’s 116,000 employees. Their compensation—salaries, insurance and pensions—costs taxpayers more than $5 billion a year.

The Kaine package is expected to rely on further spending cuts, likely ranging from 5 percent to 15 percent, as well as a withdrawal from the state’s rainy-day fund of $400 million or more.

Also, the Democratic governor is expected to propose freeing up millions of dollars in cash by financing some construction projects with bonds, which the state repays over time with interest.

The state’s two-year $77 billion budget has been leaking cash for more than a year.

A steady decline in the Virginia economy has accelerated in recent months, attributed to the credit crisis, upheaval in financial services and the collapse of the housing market.

Earlier reductions by Kaine and the General Assembly largely spared education and human services. Both, however, will not be immune from the next round of cuts, Kaine warned legislators in August.