Gov. Tim Kaine told some of the state legislative leaders yesterday that revenues appear worse than expected. Chip Somodevilla/ASSOCIATED PRESS Visit the Photo Place

Kaine: State finances worsening

State facing more bad financial news

By Chelyen Davis

Date published: 9/24/2008

RICHMOND--

Kaine met with his economic advisors yesterday, including several budget-writing legislators, to discuss the worsening economy and the revised economic forecast for the state.

"The national conditions are such that I think it's a good idea to get folks around the table to talk about them and how they bear on the Virginia revenue forecast," Kaine said, addressing the Governor's Advisory Council on Revenue Estimates. "We're seeing headlines we've never seen in many of our lifetimes, unprecedented headlines in terms of what's going on in the financial industry."

The GACRE meeting usually is held in November, but Kaine said in August he would hold it early, so that the forecast could be revised and he could start making budget cuts as necessary.

He had first announced the prospect of a budget shortfall and likely budget cuts last month in an annual speech to legislators.

The prediction of a $2 billion shortfall equals a 6 percent drop in expected revenues.

Kaine did not make any budget cuts yesterday; he will wait until the first few days of October, when he sees revenue numbers from the first quarter of the fiscal year that began July 1.

But for the first time in this economic downturn, Kaine is announcing a forecast that says this is a recession; previous forecasts from economists still predicted some economic growth.

"Most economists will now say we're in a national recession, which was not the case," Kaine said. "The standard forecast now is that we're in recession and we will be for a couple of [fiscal] quarters."

The worst-case forecast, Kaine said, calls for the recession to be deeper and last longer, and could put Virginia's shortfall closer to $3 billion, or 9 percent.

The volatile national financial scene, with Congress debating a $700 billion financial bailout, increases the uncertainties in Virginia's economy, Kaine said.

Kaine has already asked state agencies to submit proposed plans to cut their budgets, and has said in the past that those cuts are likely to be painful; agencies have already had to cut their budgets in recent months, and while past cuts exempted services like public education, the next round of cuts may not.

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Date published: 9/24/2008

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