RICHMOND -- A budget-weary but confident Gov. L. Douglas Wilder yesterday told Virginia lawmakers that he has ordered his cabinet secretaries to find ways to cut agency budgets "significantly" for the 1995 and 1996 fiscal years.

In testimony before the General Assembly's money committees, Wilder said the budget cuts are necessary to avert a potential budget gap in excess of $500 million in the coming fiscal biennium.

Although the state tracks financial performance on a fiscal year basis, it budgets for two years at a time. Wilder's budget proposal for the 1995 and 1996 fiscal years beginning July 1, 1994 is due Dec. 20.

The Virginia governor said that although general fund revenues "could increase by as much as $1 billion" in the 1995 and 1996 fiscal years, "mandated spending on Medicaid, prisons, education, and aid to localities could require spending of an additional $1.5 billion based on current policies."

Wilder said that when salary increases are included, "the gap becomes considerably larger."

Speaking to reporters after his presentation to the joint hearing of the state's House Appropriations Committee, House Finance Committee, and Senate Finance Committee, Wilder said he was not giving cabinet secretaries a benchmark level for cuts.

"I want them to do their best job." Wilder said. "I don't want to say, ~Look, I need $5, so scrape up $5 in cuts."' Rather, he said, he wants his cabinet to establish priorities.

He said his question for cabinet secretaries is, "What do you think you can do without?"

Wilder said his approach to budget cuts is consistent with, his past practice of providing agency heads with the flexibility they need to establish budgetary priorities.

He acknowledged that the task of finding cuts will be difficult in light of the belt-tightening that already has taken place during his administration. "This is not the time to be talking about fat in government," Wilder said. "If there's any fat out there, I'd like to see it."

But he said the job is both feasible and necessary.

"The federal government is quite willing to spend more than it takes in, whether in good times or bad," Wilder told lawmakers. "Fortunately, thank God, we don't budget like the federal government."

Although Wilder did not set an across-the-board goal for the requested cuts, he offered agency heads broad guidance.

He said, for example, that his biennial budget should be balanced without tax increases or transfers of special fund revenues to the general fund. In addition, he urged cabinet secretaries to find ways of reducing the growth of entitlement programs, even if changes in Virginia law or waivers from the federal government would be required to implement them.

Wilder also said that state aid to locally administered programs, which accounts for 47% of the state budget, "must be on the table" for possible cutting.

The governor also said he wants agency heads to offer proposals for eliminating activities or closing facilities that ultimately will lead to fewer state employees. Wilder said he would like agency heads also to consider ways of spreading cuts over fiscal 1994 and the next biennium as a means of reducing disruptions from the cuts.

Wilder also said he was asking cabinet secretaries to find ways of avoiding large tuition increases for students at state colleges and universities, and to provide proposals "that will strengthen our state's economy."

"When Virginia's families are faced with insufficient income, they look at their spending and make decisions about what's essential, what's important, and what's nonessential," Wilder said. "That's exactly what they expect us to do."

Wilder said he has no doubt that many of the ensuing proposals will prove controversial. But he urged lawmakers to be firm in the face of criticism. "The worst thing we could do is to mimic Congress and suggest that nothing can be cut because everything is a priority," he said.

Although Wilder's presentation was dominated by his call for further government streamlining, he was able to provide lawmakers with some good news.

He said the state's ending general fund balance for fiscal 1993 stood at $331.8 million, a 70% increase from fiscal 1992.

A state's cash balance in its general fund is the difference between its assets and its liabilities.

The $331.8 million ending balance for fiscal 1993 was made up of: $79.9 million for the state's rainy day fund; $60.2 million in unexpended capital outlays for projects already approved by the General Assembly; $101.5 million in unexpended appropriations that are being carried forward to the current fiscal year; $29.5 million the General Assembly set aside to meet spending requirements in fiscal 1994; and $59.7 million that is undesignated and available for appropriation in the Assembly's 1994 session.

According to Wilder, Virginia's general fund balance has improved dramatically in recent years, climbing from $45.5 million at the end of fiscal 1991 to $191.2 million in fiscal 1992.

The unspent balances should provide flexibility to agencies that "avoided spending every penny at the end of fiscal 1993," Wilder said.

In separate testimony, Virginia Finance Secretary Paul W. Timmreck said revenue collections for July were 5.2% higher than a year earlier. But he stressed that one month of data is hardly sufficient to judge the status of state revenue collections for the fiscal year.

Timmreck said all indications point to a continuation of a slow and uneven economic recovery, factors that already are incorporated into the state's economic forecast.

Touching on the state's revenue prospects in the current fiscal year, Wilder noted in his presentation that revenue collections need to increase 4% to meet the 1994 budget.

"Following a year in which revenues increased 9.1%, some might question whether this forecast is too conservative," Wilder said. But because of the prospect of further defense downsizing and corporate restructurings, "this is no time to be ebullient about Virginia's revenue prospects," he said.

Defense-related, federal military, and civilian employment accounted for 14% of all Virginia jobs in 1990. But state officials expect to lose about 39,000 of those jobs by the year 2000 because of defense cuts and base closures.

Moreover, private-sector employment also is expected to be hurt by defense cuts. Officials expect the state to lose 13,600 manufacturing and transportation equipment jobs by the year 2000.

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