National economic woes have come to the Commonwealth. Although Virginia’s economy is in better shape than in many other states, we are not immune to current trends.

State revenues are not meeting expectations for the current year and it is already clear that forecasts must be adjusted downward for the next fiscal year beginning July I, 2009.

Governor Kaine recently announced revised forecasts for this year and next, and reductions to the current state budget. Reductions in spending for the following fiscal year will be included in his December budget revisions.

A total of $973 million must be reduced in this fiscal year in order to have a balanced budget. Unlike the federal government, Virginia must keep revenues and expenditures in balance each year – no printing money or Treasury borrowing here!

Overall the shortfall will be addressed through state agency savings and spending reductions of nearly $350 million, a withdrawal of about $400 million from the Revenue Stabilization Fund, and conversion of cash capital projects to bonds.

Because Virginia already runs a pretty tight ship, any reductions have real consequences. However, the Governor has done a good job in minimizing the impacts. For example, K-12 education is exempt from any direct cuts, though there are some administrative savings at the Department of Education.

Spread across many agencies, there will be 570 layoffs, the elimination of more than 800 additional positions that are currently unfilled, a continued freeze on new hiring, and the delay of a previously planned 2% salary increase for state employees.

Colleges and universities will have reductions of 5 to 7 percent. The schools themselves will determine how to cope with the cuts, but it will obviously take some creative thinking to cope with changes now that the school year is underway.

Some savings have been accomplished without really affecting program delivery. Almost $100 million has been saved with improved business practices and efficiencies; there were unexpended balances from the previous fiscal year that totaled over $40 million; and the Governor’s directive to agencies in August to implement a hiring freeze and eliminate discretionary spending has already resulted in $24 million savings.

As chair of the Natural Resources and Economic Development subcommittee of the Senate Finance Committee, I have pored over the pages of detailed cuts in those areas. Many reductions are administrative office savings and will have little impact; others are more far-reaching.

The state parks budget offers examples. On the administrative side, computer equipment inventories will be reduced; the parks visitor statistical survey will occur less often; and some vacancies in the reservation center will not be filled. However, other reductions will be more noticeable. Openings of new state park facilities will be delayed for several months; maintenance projects will be postponed as will the purchase of new heavy equipment and vehicle replacements. Resource management projects including tree replacement, shoreline erosion and trail maintenance will be postponed. Even support for state park volunteers will be reduced.

And this is only the beginning. Reductions in FY10 will be deeper and more painful.