Kaine: Virginia budget gap will reach $400 million

Aug. 20--Gov. Timothy M. Kaine will introduce his proposed spending plan for the 2008-10 biennium in December.

Virginia will face about a $400 million shortfall during this current fiscal year, Gov. Timothy M. Kaine is expected to announce today.

Sources told The Times-Dispatch that the Democratic governor will inform the General Assembly's money committees this morning that a slowed economy will result in less available cash than projected for the period covering July 1 to June 30. The current biennial budget is $74 billion.

Virginia already has seen signs of the economic downtown. State-tax collections fell about $240 million short of forecasts for the budget year that ended June 30, partly because of a weakening housing market.

Kaine could announce that agencies are being instructed to prepare plans to reduce spending up to 5 percent, sources said. No details were available.

Kevin Hall, Kaine's spokesman, declined to comment.

Kaine curtailed his plan to provide publicly funded preschool for 4-year-olds whose parents want them to attend. Last week, he announced a plan to expand the number of disadvantaged children currently served, reaching about 30 percent of the state's 4-year-olds by 2012.

If his proposal clears the Republican-controlled legislature, it would cost about $125 million a year -- much less than the $300 million originally called for to develop a universal pre-kindergarten program. However, some Republicans have said now is not the time to expand or introduce programs.

Kaine will introduce his proposed two-year spending plan in December, which would cover the 2008-2010 biennium. That will be the first and only full budget he can call his own, which the assembly will act on during the upcoming session that starts Jan. 9.

This month, a new think tank predicted a $1.2 billion financial gap in the coming two years. The Commonwealth Institute for Fiscal Analysis, affiliated with the Virginia Interfaith Center for Public Policy, attributed the potential shortfall to several factors, including declining home sales in affluent Northern Virginia and the rising cost of tax breaks.

Virginia has a "rainy-day fund," which exceeds $1 billion, for fiscal emergencies. However, sources said lawmakers are loath to tap that because the state isn't in a recession.

News of leaner economic times and possible cutbacks come as the Kaine administration is feeling pressure to pump money into the state's mental-health system in the aftermath of the Virginia Tech tragedy. Last April, a mentally ill student, Seung-Hui Cho, gunned down 27 students and five faculty members before turning the gun on himself.

Also, the announcement is taking place as Democrats and Republicans are preparing for a Nov. 6 election that could determine control of the assembly. Virginians will decide all 100 House of Delegates and all 40 state Senate seats, and Democrats hope to boost their numbers.

Contact Pamela Stallsmith at (804) 649-6746 or pstallsmith@timesdispatch.com

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