Gov. Kaine’s warning of spending cuts to come casts a cloud over county and school budgets
By James P. Gannon
Rappahannock County’s school budget came under a new cloud of uncertainty this week with Gov. Tim Kaine’s warning that he may have to cut spending on education and other Virginia programs this fall because of a deepening shortfall in state revenues.
The Commonwealth’s worsening budget picture also could affect local government programs and upset plans for future spending, according to County Administrator John McCarthy. Both he and School Superintendent Robert Chappell said they are uncertain what impacts the threatened cuts may have, but both are bracing for another squeeze on spending plans.
On Monday, the governor told the finance committees of the Virginia legislature that tax revenues are lagging far behind his earlier projections due to the slowdown in the national economy. Slumping home sales, sluggish retail sales and slowing income growth are biting into Virginia’s revenues from sales and income taxes.
Kaine declined to give any estimate of the budget shortfall or the cuts to come, but several legislators said the budget gap could be $1 billion or more for the current 2008-2010 period. The governor will not reveal his revised revenue projections until October, in what some Republican legislators saw as a move to push spending cuts beyond the November 4 general election.
Unlike a previous round of belt-tightening that spared vital government programs, this fall’s new round of spending cuts is expected to affect education, transportation and other core governmental services, Kaine indicated.
“We have held public education harmless from the effects of the slowing economy,” up to now, Kaine said. But he added: “The need to engage in a third round of budget reductions will mean, by necessity, that all programs, including those previously held harmless….will be on the table for review.”
“As we go into a next round of cuts, it is clear that the choices will be more difficult,” the governor said. “The need for tough decisions will require examination of all areas of state spending.”
Rappahannock County’s school budget has already taken a blow from the state in a revision of the Local Composite Index, the formula that determines basic per-pupil state aid. As a result of Rappahannock being classified as among the “richest” jurisdictions in the Commonwealth, state funding to Rappahannock schools in the current budget year is projected to fall nearly 14% to about $2.7 million from the previous year’s $3.2 million.
A cut in basic state school aid, if it comes, would force tough spending decisions on the county’s School Board in this current school year, and perhaps for coming years. But it’s not yet known what form the governor’s cuts may be, nor how deep they will slash.
“I had heard rumblings that this was going to happen,” commented Superintendent Chappell Tuesday. “We don’t know the specifics, and there may be no announcement until after the November election.”
Chappell said he is hoping that the cuts in education will not come in basic state aid, but rather in certain programs that may not be relevant to Rappahannock schools. “I would think that if they were going to cut basic aid that it would be done sooner, rather than later,” he remarked. The longer the cuts are delayed, the deeper they will have to be for the remainder of the current year.
“We are keeping our fingers crossed that the basic aid won’t be cut,” he said. An across-the-board cut in state per-pupil aid would affect Rappahannock’s school budget more than some cuts in particular programs, such as the governor’s expanded spending on pre-kindergarten programs, in which this county does not participate.
County Administrator McCarthy said “we are all waiting on how this will be implemented,” so there are many uncertainties about the impact on Rappahannock.
The initial impact, he said, may fall on state agencies like the Virginia Department of Transportation and the Department of Social Services. Tightening their budgets could affect everything from road maintenance to hours of operation at health clinics or eligibility rules for state programs, he said.
Such belt-tightening sometimes leaves each department with discretion over which programs or services to reduce, McCarthy noted. Other times, governors may order flat, across-the-board spending cuts of a certain percentage. “Sometimes you just get told that all school divisions will have to give back 7% of the money” promised in state aid, he said.
Beyond the impact on the current fiscal year, McCarthy said the state’s revenue shortfall could impact future years. “This is going to blow out our capital planning” on major projects, such as the new Rappahannock County government building on the drawing boards to be built in the commercial zone adjacent to Rappahannock National Bank on Route 211, McCarthy said.
The county government has been accumulating funds for the new building project that was approved by the Board of Supervisors and funded with an extra two cents on the real estate tax rate. That money is being set aside for the county office-building project, but the prospect of further state funding reductions for local government could change the picture.
If basic government services and programs are cut by the Commonwealth, the supervisors might decide to offset those cuts by dipping into the surplus being accumulated for the office building, McCarthy suggested. “Maybe we can dip into those funds; maybe we would say, ‘Let’s not build that building,’” he said.
“There are going to be some hard choices,” he predicted. And if the national recession continues for another year or more, the coming round of state budget cuts may not be the last round, McCarthy speculated.
The economic slump shows few signs of ending soon. Gov. Kaine made optimistic assumptions in January that the economy would rebound to keep his budget in balance. But the evidence coming into to state tax coffers is grim.
Kaine’s budget projected that Virginia sales tax revenue would increase by 4.9% in the fiscal year that began July 1, but collections have grown by less than 1% over the past four months, the governor told lawmakers. Income tax revenue was projected to grow 6.4% this year, but is rising by less than 1.6% so far, he said.
Republican lawmakers hammered Kaine for being too slow to recognize that economic conditions made his budget projections unrealistic.
“Over the past several weeks it has become apparent that the budget just adopted in March will need to be cut by upwards of $1.4 billion,” said Sen. Mark Obenshain, who represents Rappahannock County in the state Senate. “That will result in less state money for schools, higher college tuition and reduced funding for virtually every government service.”
Obenshain said the deepening economic slump was evident in late 2007 when Kaine was preparing new spending plans and projecting strong revenue growth in 2008.
“It wouldn’t have taken an expert to determine which way the fiscal winds were blowing in the waning days of 2007,” Obenshain said. “Profligate spending, unfortunately, was the order of the day, and the attempts my Republican colleagues and I made to inject a dose of fiscal sanity into the budget process were dismissed out of hand. Reality and new spending programs were at odds, and the Governor decided that reality would simply have to give way.”
-- James P. Gannon
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