Governor anticipates fiscal difficulties for state

Gov. Bob McDonnell’s administration annually asks state agencies to prepare plans for cutting their budgets if it were to become necessary in the coming fiscal year. But this year’s request, announced Thursday, was made all the more relevant by a persistently slow economy and what McDonnell’s office called “unprecedented uncertainty” in Washington D.C.

The governor’s chief of staff Martin Kent issued a memorandum, ordering state agencies to prepare strategies to manage 4 percent cuts of their legislatively appropriated funds.

Institutions of higher education were among agencies asked to prepare for the cuts, but Kent said their budgeting would be addressed in future communication.

Kent said a fiscal cliff in the third quarter of fiscal year 2013 and the sequestration provision of a budget control act passed last year could lead to a second recession and could likely negatively impact the commonwealth.

“National economists have down-played any expectations of a near-term, vigorous recovery and confirmed the direct connection between the existing economic uncertainty and the potential for future revenue stagnation or losses,” Kent said in the statement.

Federally mandated Medicaid expansion will also require increased spending because the state is responsible for administering the program, which Kent said would strain Virginia’s budget in the upcoming year.

The health care program for low income individuals is one of the top drivers in the state budget and comprises about 20 percent of the general fund.

The McDonnell administration urged agencies to prioritize long-term cost-cutting strategies rather than one-time savings, such as the dismissal of personnel or hiring freezes.

“While we welcome any and all valid savings strategies, it is important that the majority of your reduction strategies emphasize recurring savings rather than one-time savings,” Kent said.

Agencies are expected to have plans formulated by Nov. 21.

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