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Ominous forecast for two-year state budget

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Lawmakers say there’s little flexibility in spending plan, as General Assembly prepares for session

By Landmark News Service

WILLIAMSBURG— Virginia’s next two-year budget is likely to be forged without much new discretionary money, amid rising expenses in core programs and under a cloud of federal uncertainty in this defense-reliant state.
That sobering message was delivered Nov. 28 at a Virginia Senate Finance Committee meeting attended by lawmakers and lobbyists eager to learn about the state’s fiscal condition.

What they heard wasn’t encouraging. Nor was it especially surprising, since Virginia has gone through several years of restrained postrecession budgeting.
After accounting for rising health costs, education and public safety expenses, analysts estimated only about $200 million remains uncommitted out of a projected $37.5 billion general fund budget.
Gov. Bob McDonnell already has asked the heads of state agencies to come up with proposed spending cuts.
“You don’t have a whole lot of budget flexibility,” Senate Finance staff director Betsey Daley told the audience.
Further complicating matters are the effects of a sluggish economic recovery on state revenue collections, political gridlock in Congress and the impacts of the problem-plagued federal health care law.
“It looks like federal defense spending cuts are real and we will have to deal with them,” Daley warned.
That contributes to other problems, Sen. Walter Stosch explained. “The threat of sequestration... has prompted a pull-back from federal contractors,” said the Henrico County Republican, who chairs the Finance Committee.
“We are seeing less job growth in the categories that support these industries, and more growth in lower-paying categories such as education and health.”
That was borne out in data presented by a Federal Reserve Bank of Richmond analyst who said employment growth in Virginia has lagged behind the national average while key industries like construction, manufacturing and the technical sector related to government procurement haven’t seen hiring recover.
The development of the next two-year budget will play out in the General Assembly with partisan tension simmering between Gov.-elect Terry McAuliffe, a Democrat committed to expanding Medicaid to cover more uninsured Virginians, and House Republicans opposed to it.