Gov. Terry McAuliffe has begun sharpening the budget ax.
The governor’s chief of staff, Paul Reagan, has directed state agency heads to make plans to cut their operating budgets by 5 percent in this fiscal year and 7 percent in the next to close an estimated $881 million revenue shortfall.
Higher education will be exempt from the across-the-board cuts, but not the targeted reductions the governor is expected to announce later.
“Savings strategies should focus on identifying the lowest priority activities in your respective agency and on protecting priorities that are essential to Virginia’s economic growth,” Reagan said in a memo to agency heads late Friday.
The additional shortfall comes on top of $1.55 billion in reduced revenues in the two-year budget adopted by the General Assembly in June, for a total of more than $2.4 billion less than when the legislature ended its regular session in early March.
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McAuliffe told the assembly money committees on Aug. 15 that he will address spending for next year in his proposed budget amendments in December, but he said the state will have to cut $346 million from this year’s budget immediately.
The decision to exempt higher education from plans for across-the-board cuts did not sit well with a representative of state employees, who said the governor also should look beyond the general fund to transportation and other functions that don’t depend on general tax revenues.
“If the administration is truly serious about long-term budget-cutting, then every item in state government should be on the table,” said R. Ronald Jordan, executive director of the Virginia Governmental Employees Association. “Only then can employees be assured that the pain is being shared by everyone, and not just a dedicated few.”
Jordan said the across-the-board cuts would “fall disproportionately on the dedicated state employees working in the public safety and health and human resources agencies and the smaller agencies in natural resources and commerce and trade.”
At the same time, he said, the state would continue to divert money from the general fund to transportation and issue bonds “for many nonessentials rather than just critical necessities.”
Brian Coy, press secretary for McAuliffe, said Monday, “The governor is committed to balancing the budget in a responsible way that prioritizes items that are essential to Virginia’s economic competitiveness.”
In his memo to agency heads, Reagan urged them to identify recurring cuts in spending, especially in the second year, while protecting McAuliffe’s budget and policy priorities.
Reagan set a deadline of Sept. 19 for agencies to submit their plans for reducing spending. “You may not submit reduction strategies that simply pass on additional costs to another state agency or that reduce revenues to another state agency,” he said.
“You may include strategies that would increase fees charged by your agency to outside parties,” he added.
McAuliffe has the authority to cut spending by up to 15 percent without legislative approval, but he is expected to work closely with leaders of the House Appropriations and Senate Finance committees to identify spending cuts while the legislature is in special session next month.
“As he promised in his speech to the money committees, he and his team are working closely with those committees on a plan to close the current budget shortfall based on that approach,” Coy said.
“The agency recommendations will obviously be integral to that process this year,” he said. “They will also be central to the governor’s budget proposal for FY2016, which the governor will develop in coordination with the General Assembly and announce in December.”
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