Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, June 14, 1990 TAG: 9006140583
SECTION: VIRGINIA PAGE: B-1 EDITION: EVENING
SOURCE: MARGIE FISHER RICHMOND BUREAU
DATELINE: RICHMOND LENGTH: Long
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.
"The news media didn't report our concerns, and the Democrats just laughed them off," the Republican statement said. "The Democrat-appointed staff assured everyone there was no problem. . . . Now the Democrats feign surprise.
The people of Virginia should be truly angry about this mismanagement of their money," the statement said.
Virginia's latest $100 million revenue shortfall probably will translate into "a $300 million problem" that the Wilder administration must deal with in the next few weeks, Secretary of Finance Paul Timmreck said Wednesday.
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.
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."
Fincastle Sen. Dudley Emick, a Democrat who serves on the Senate Finance Committee, agreed with Republicans 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.
Senate Finance Chairman Hunter Andrews of Hampton blamed the income tax changes for the revenue shortage. "I don't think the economy is that bad," he said.
Vinton Del. Richard Cranwell, chairman of the House Finance Committee, said he and other financial experts in the legislature had expected a revenue rebound in the final months of this fiscal year.
"It appears that some of the things we have done affect tax behavior in a way we didn't expect," Cranwell 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.
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, is 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.
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."
Political writer Rob Eure contributed information to this story.
by CNB