AP Political Writer
RICHMOND, Va. (AP) - Citing a looming federal fiscal crisis and its potential to devastate a lagging recovery, Republican Gov. Bob McDonnell on Thursday ordered Virginia state agencies to immediately draw up plans to pare their budgets by 4 percent.
The memo by McDonnell's chief of staff, Martin Kent, to executive agency heads cites the "fiscal cliff," the prospect that Congress won't agree on debt reductions in time to avert automatic, across-the-board cuts starting Jan. 1. The potential cuts are part of a 2011 budget compromise that averted a default on the federal debt.
The Associated Press obtained a copy of the memo.
Kent gives agency directors until the close of business on Nov. 21 to submit their contingencies for budget cutting for McDonnell to review as he prepares mid-term revisions to the state's two-year budget to present to lawmakers next month.
The memo was sent shortly before 4 p.m. Thursday, less than two days after President Barack Obama defeated Republican challenger Mitt Romney, whom McDonnell campaigned extensively for. Only three months earlier, McDonnell's administration was touting a state budget surplus of nearly $450 million, the third in as many years.
McDonnell was headlining a preview screening of the coming motion picture, "Lincoln," in Richmond _ where much of the film was shot _ and was not immediately available for comment.
His chief spokesman, J. Tucker Martin, said the requirement that agencies prepare for cuts is not new.
"We ask agencies for spending reduction proposals and strategies every year. This year is no different," Martin said, but acknowledged a greater urgency than in the past, with the federal government to blame.
"This year the importance of this exercise is heightened by the unprecedented fiscal uncertainty presented by the looming federal fiscal cliff, and other budget pressures potentially facing the Commonwealth," Martin said. "We're just seeking ideas for savings at this time, not making final decisions."
With Obama winning re-election, Democrats in greater control of the U.S. Senate and the House still firmly controlled by anti-tax Republicans, Kent's memo expresses alarm that a 15-month partisan logjam over a deficit deal won't be broken. It warns of "unprecedented uncertainty in Washington and its detrimental effects on this state."
He is referring to an 11th-hour compromise in August 2011 under which Congress agreed to increase the amount of money the federal government could borrow in exchange for a subsequent agreement by a "super committee" on $1.5 trillion in targeted cuts. The committee failed to reach a deal, nor have the White House and Senate been able to agree with the House on a debt-reduction plan. Without it, cuts that will total $1.2 trillion in defense and discretionary spending will take effect starting Jan. 2.
It also cites significant increases in the state's costs for Medicaid, the shared federal-state program that provides health care for the needy, elderly, disabled and for low-income families with children, and a sluggish economy.
"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. In the face of this uncertainty, it is our constitutional responsibility to prepare for the associated risk," the memo said.
That's already manifesting itself in Virginia's monthly state revenue reports. October's monthly report was the third in a row to show a decline in general tax collections, with the state finishing the first quarter of its current fiscal year 1.3 percent below the revenue forecast on which budgeted spending is based.
Secretary of Finance, revenue reports: http://1.usa.gov/r0V8eq
(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
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