[November 22, 2008]

Senate panel details possible cuts: Finance committee report echoes downbeat forecast by House appropriations

(Richmond Times-Dispatch (VA) Via Acquire Media NewsEdge) Nov. 22--Cuts to Medicaid and the money the state provides to local governments for public education are among the unsavory options confronting state lawmakers.

On Thursday, a report on the fiscal health of the commonwealth prepared by the Senate Finance Committee estimated revenues for the 2008-10 biennium would fall short of the $77 billion budgeted expenditures by about $3.2 billion -- and perhaps as much as $3.5 billion.

With roughly $1 billion in cuts already being implemented in the budget for fiscal year 2009, which began in July, that leaves $2.2 billion or more for legislators to slash in fiscal 2010 when they reconvene in January for the General Assembly session.

Traditionally, state programs that provide aid to localities and aid to individuals are spared wholesale budget cuts.

The Finance Committee report makes clear that reductions to core state agencies and in higher education funding alone will not close the gap.

"Tough choices will have to be made about reductions to state aid programs," states the report, which cautions against using "one-time items or gimmicks" to close the gap.

"Unless services or employment are significantly reduced, savings will not be substantial," the report states.

Under the term "Potential Targeted Reductions" the Finance Committee report offered the following possibilities:

Public education:

--Reduce the state's share of Standards of Quality support from an average of 55 percent state and 45 percent local to a 50-50 split, for a savings of roughly $300 million in fiscal year 2010.

--Increase the maximum pupil-teacher ratio in grades 5 through 12 from 21:1 to 22:1, to save $50 million.

Medicaid:

--Exclude inflationary increases and eliminate projected increases in managed-care payment rates for Medicaid provider groups such as hospitals and nursing homes. That could save nearly $60 million in fiscal year 2010.

--Roll back the expansion of Medicaid coverage to people who have an income of no higher than 74 percent of the poverty level. The current cutoff is 80 percent of the poverty level. That rollback could save an estimated $60 million.

Other options:

--Review whether agencies should be eliminated or consolidated.

--Conduct administrative efficiency reviews targeting reductions in expenses, travel and staffing.

--Postpone raises; increase fees for services; raise tuition.

One lawmaker attending the Finance Committee retreat in Fredericksburg, Sen. R. Edward Houck, D-Spotsylvania, said the legislature should also consider the expenditure of aid to localities from the car tax, which accounts for roughly $950 million.

The Democrat-controlled Senate Finance Committee report is consistent with the gloomy forecast offered by the Republican-controlled House of Delegates Appropriations Committee, which met earlier in the week.

Next month, Gov. Timothy M. Kaine will make his report to the joint committees of the legislature outlining the fiscal challenges facing the commonwealth in the coming year.

Contact Jim Nolan at (804) 649-6061 or jnolan@timesdispatch.com.

To see more of the Richmond Times-Dispatch, or to subscribe to the newspaper, go to http://www.timesdispatch.com.

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