A fiscal cliff could affect everyone paying income taxes come January if Congress does not pass a budget deal by Dec. 31. Virginia policymakers are saying the cliff could lead to 200,000 jobs lost in the commonwealth.
Inability to reach a bipartisan compromise in Congress and a slew of spending cuts and tax increases would knock the economy into a second recession next year, economists say.
Virginia revenue increased by 15.7 percent in October, a 4 percent spike in revenue for the entire year. This increase places the state 1.3 percent ahead of projections for this point, according to a ““short term revenue report”:http://www.cavalierdaily.com/article/2012/11/governor-anticipates-fiscal-difficulties-for-state” released by Gov. Bob McDonnell Tuesday.
Despite the net revenue increase, Virginia is bracing for steep financial challenges. McDonnell warned residents against taking the “short term” nature of the increase too seriously.
The fiscal climate is highly volatile, with state revenue decreasing 0.7 percent in September, McDonnell said in a press release.
To “prudently prepare” for 2013, McDonnell has asked all state agencies to submit plans for what their budgets might look like with a four percent decrease in spending.
State Sen. Creigh Deeds, D-Charlottesville, said the October financial report is good news. Virginia has a historically low dependence on federal aid, Deeds added.
“We are only budgeting what we think we are going to have,” Deeds said.
Inability to compromise on a budget this year could result in 200,000 jobs lost in Virginia, Deeds said.
“It’s a double-edged sword,” Deeds said. Unemployment would be coupled by a greater demand for Medicaid benefits, unemployment compensation and other pools of federal revenue, he added.
Congress returns to session Tuesday for a session that could last until the end of the year.
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