RICHMOND -- Gov. L. Douglas Wilder told the Virginia General Assembly Friday he foresees no need for further budget cuts or the 6% cuts previously planned for state agencies.

In a 20-minute address to members of the General Assembly's money panels -- the Senate Finance, House Appropriations, and House Finance committees -- Gov. Wilder said his administration is now forecasting 3.1% revenue growth for the 1992 fiscal year, which began July 1.

The forecasted growth, nevertheless, is $150.8 million less than the administration had foreseen in February, demonstrating the continued intrasigence of Virginia's recession.

But Gov. Wilder heralded the revised forecast as "good news indeed to our state agencies," noting that if it had been necessary to go forward with the 6% cuts, agencies would have slashed spending 22% during the 1991-1992 budget cycle.

"At the risk of disappointing the pundits who thrive on bad news, I believe that we in Virginia have much to be grateful for," he said.

Gov. Wilder said the combined effect of foregoing scheduled budget cuts and the revised economic forecast leases Virginia with a projected $37.4 million in the unappropriated balance, or reserve fund, which once stood at $200 million.

The governor also told legislators he will formally recommend the restoration of $15 million that had been cut earlier from educational aid for localities. The restoration would reduce the reverse fund to $22.4 million.

"We have a few dollars," Gov. Wilder explained to reporters following his remarks, adding that Virginia's counties are smarting from a steep falloff in sales tax receipts.

"Because of the downturn in sales, it is essential that we give localities this money as soon as possible," he said. "For some counties, this will make a tremendous difference." He said he hopes the money will be made available to local governments by December.

Paul W. Timmreck, Virginia's finance secretary, later told the money panels the governor will submit legislation to restore the education money on or about Nov. 18, when the General Assembly will meet to consider congressional redistricting plans in the wake of the latest census.

Following his testimony to state lawmakers, Gov. Wilder addressed reporters and said, "We will replenish the reserve." How that will be accomplished remains uncertain, though the governor appeared to rule out the possibility of a tax increase.

"Last year people thought we would have to raise taxes, but we didn't, and we still balanced the budget," he said, adding, "We haven't experienced the kind of ravages other states have struggled with."

Mr. Timmreck attributed the state's revenue slide to continued weakness in the sales tax receipts. Officials now estimate they will collect $92.9 million less in sales tax than they had thought in February.

Individual income tax collections also are expected to provide $61.2 million less than previously expected.

Mr. Timmreck said the economic boost that most economists had expected with the end of hostilities in the Persian Gulf "has not materialized."

He added, "I won't be comfortable saying Virginia is out of the recession until I see solid employment growth in a quarter or one whole quarter where the sales tax is up to about the level of inflation."

Under the current forecast, as compared with figures from the same period last year, revenues are expected to decline 3% in the July-through-September quarter and 1.7% in the October-through-December quarter.

Officials project more robust growth early in the 1992 calendar year and are projecting a 7.5% revenue increase in the January through March quarter. Mr. Timmreck said officials expect to end the fiscal year with 1.6% growth in the April through June quarter.

Several committee members expressed some uneasiness with the relatively small margin of error that is allowed the state with the reserve fund trimmed to just more than $20 million. "Last year we were looking under rocks for revenue," one lawmaker said. "There aren't many rocks left."

Mr. Timmreck said that budgeting for the next three years will be "challenging," but the state is still "in pretty good shape."

He acknowledged the state faces a potential $440 million liability in a case pending before the Virginia Supreme Court, however. In the case, Harper v. Virginia Tax Commission, federal retirees are seeking refunds on taxes they paid under a system that subsequently was found unconstitutional. Under that system, the pensions of former state workers were not taxed, but those of former federal workers were.

The U.S. Supreme Court several years ago ruled such tax inequities unconstitutional, but declined to rule whether refunds were necessary. Earlier this year, the Virginia Supreme Court declined to order refunds.

The Harper litigants appealed to the U.S. Supreme Court, which sent the case back to the Virginia high court for reconsideration in light of a ruling in James B. Beam Distilling Co. v. Georgia. In that case, the court held that its rulings generally should be given retroactive effect, meaning that when state taxes are declared unconstitutional, the states levying the taxes in most cases will have to provide refunds.

Mr. Timmreck said officials expect the state supreme court to hear arguments in the case in September, with a ruling possible by November.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.