Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, June 14, 1990 TAG: 9006140226
SECTION: VIRGINIA PAGE: A1 EDITION: METRO
SOURCE: MARGIE FISHER RICHMOND BUREAU
DATELINE: RICHMOND LENGTH: Medium
That is because factors causing state tax collections to fall short in the current fiscal year are also expected to affect revenue collections in the two-year budget period that begins July 1, Timmreck said.
Wilder and Timmreck held a news conference Wednesday to report that tax collections are likely to come up shy of projections by more than $100 million when the books close on this fiscal year on June 30.
Wilder said he is taking steps to ensure that the state will not end the current year in the red. But the situation will mean that the state must make a new round of spending cuts and revise the revenue forecasts for the 1990-92 biennium, he said.
The latest $100 million-plus budget problem follows a $248 million revenue shortfall that former Gov. Gerald Baliles, Wilder and the legislature had to address during the 1990 General Assembly session.
Although $300 million represents only about 1 percent of the 1990-92 state budget, some state agencies, and particularly colleges and universities, say they are already suffering from previous budget cuts.
Timmreck was unable to explain exactly why individual and corporate income tax collections are lower than anticipated. He said it could be due to 1986 federal income-tax reform, or state pension-tax reforms that the General Assembly enacted last year.
Also, Timmreck said, "perhaps taxpayers are becoming more sophisticated on how to reduce tax liability."
Wilder stressed that he would not know the exact amount of the deficit until this fiscal year ends.
To take care of the immediate problem, the administration will use $38 million that it had hoped would be left from this fiscal year as a surplus. That along with some unspent agency funds and budgetary transfers are expected to plug about $90 million of the expected $100 million-plus hole.
Additionally, Wilder said he was ordering that some spending be deferred until fiscal 1991.
But he made clear that additional cuts will be required in the new budget period. He said he will not be able to say what actions will be necessary until he sees the final figures for this year, but he is instructing state agencies and institutions to avoid spending on discretionary items.
Moreover, Wilder said agencies will be instructed next week on how to draw up contingency plans for even deeper budget cuts.
"With the exception of an increase in taxes, everything is on the table," he said.
He said it's possible that lottery proceeds earmarked for capital projects might be used to fill some revenue gaps, but he gave no details.
Wilder also said he does not envision changing the pension tax reform program and will not use a $200 million revenue reserve fund that he had written into the budget.
Wilder, who is trying to make his mark as a fiscal conservative and guardian of the state's financial health, said "there were those who scoffed" at the notion of creating a reserve, but he said he doubts they are scoffing now.
The legislature earmarked the reserve to cover pay raises for teachers in the second year of the 1990-92 budget. Wilder noted that he had agreed to that earmarking, "but I also said at the time it would depend on the economic condition of the commonwealth."
Reaction to the latest shortfall news was mixed.
"I don't think the economy is that bad," said Senate Finance Chairman Hunter Andrews of Hampton. "It's the way we played around with the individual income tax" that has created the shortage.
But Vinton Del. Richard Cranwell, chairman of the House Finance Committee, said he and other financial experts in the legislature expected a revenue rebound in the final months of this fiscal year.
"It appears that some of the things we have done affects tax behavior in a way we didn't expect," Cranwell said.
Republican lawmakers issued a statement saying "no one should be surprised" by the latest budget crunch. The GOP's Joint Legislative Caucus said Republican leaders had warned in February that revenue estimates for this year were overly optimistic, even after the Democrats had revised the estimates downward.
Fincastle Sen. Dudley Emick, a Democrat who serves on the Senate Finance Committee, agreed that the latest shortfall should not come as a surprise to administration budget officials.
Emick said he thinks the state is suffering from a national economic downturn, and "it's going to get worse before it gets better." He said he warned in March that the state budget was too large and he voted against it.
He also blamed various tax reform and relief bills that the assembly has passed. The legislature's adjustment of state taxes following the 1986 federal tax reform was too generous, Emick said.
"They did it to get the Democrats re-elected. And now everybody's suffering together," Emick said.
Political writer Rob Eure contributed information to this story.
by CNB