THE VIRGINIAN-PILOT 

              Copyright (c) 1995, Landmark Communications, Inc.



DATE: Tuesday, September 19, 1995            TAG: 9509190087

SECTION: LOCAL                    PAGE: B3   EDITION: FINAL 

SOURCE: ASSOCIATED PRESS 

DATELINE: RICHMOND                           LENGTH: Medium:   55 lines

STATE TO LOSE FEDERAL FUNDS, GAIN FLEXIBILITY, PANEL IS TOLD VA. WILL GET $150 MILLION LESS IN THE NEXT FISCAL YEAR, LEGISLATORS ARE TOLD.

Virginia will lose millions of dollars but gain flexibility as a result of federal budget-cutting efforts under way, a General Assembly committee was told Monday.

Terry Atkinson of the House Appropriations Committee staff said cuts in major programs could cost Virginia about $150 million in the next fiscal year. The exact figure is not known because Congress is not expected to finish work on the budget until December.

Gov. George F. Allen, who is preparing his proposed two-year state budget, and the legislature will have to determine how to cope with the federal reductions.

``This is a serious and substantial matter that will be before you,'' said Rebecca Covey, who heads the Appropriations Committee staff.

Among the cuts Virginia could face: $20.6 million for job training, $18.9 million for social service programs, $30 million for housing assistance, $36.8 million for Medicaid, $17 million for education programs for at-risk children, $6 million for vocational education and $5.5 million for mass transit.

Any attempt to make up for those lost funds with state money would put a sizable dent in the administration's projected $700 million in revenue growth.

``Unless you want to commit considerable general-fund dollars, you won't be able to keep all these programs at their current level,'' Atkinson said.

However, the state apparently will have more discretion on how the money is spent. Congress wants to start providing its share of Medicaid, welfare and job training money in the form of block grants, allowing states to determine such matters as eligibility and payment levels.

One effect of changing Medicaid and welfare from ``entitlements'' to block grants is that unexpected growth in those programs no longer would be financed as part of the federal deficit. Most states, including Virginia, have balanced budgets.

Federal funds comprise about 18 percent of the state's two-year, $32 billion budget. Sixty percent of the federal money is for human resources programs, such as Medicaid and welfare. Education accounts for 21 percent and transportation 13 percent.

The Appropriations Committee also heard a generally positive report from Secretary of Finance Paul Timmreck, who said revenue growth for the first two months of fiscal 1996 was 6.6 percent - 1.8 percentage points above the official estimate.

He said his only concern is a 2 percent decline in sales tax receipts in August. The official forecast for the year is a 5.7 percent increase. by CNB