Members of the Virginia General Assembly knew we faced significant budget shortfalls and hard choices when the 2002 legislative session convened. However, the revelation of the magnitude of the spiraling budget deficit was much worse than was thought possible.
Virginia faces a budget shortfall of $1.3 billion between now and June 30, 2002, the end of the fiscal year. The shortfall for the next biennium is $2 billion more. And, if these shortfalls cannot be corrected, we could face a deficit of around $5 billion over the next four and one-half years, even if the economy recovers.
These severe budget problems call for strong action. Governor Mark Warner has proposed cuts of three percent for the remainder of 2002; seven percent for fiscal year 2003; and eight percent for fiscal year 2004. Unfortunately, everyone in Virginia will feel some of the pain of these cuts. But we must get our financial house in order to ensure our Commonwealth's fiscal stability while keeping our state's integrity to meet the critical needs of all Virginians.
Virginia's budget crisis did not occur overnight. Tax revenue was overestimated by the prior administration for 2001 while spending was not decreased to reflect actual revenue.
The Virginia Department of Transportation (VDOT) continued to keep a rosy revenue forecast even when the income was not actually there to pay for projects. Gov. Warner found serious mismanagement by VDOT. For example, project costs increased an average of 217 percent from the time of their initial estimate to the time contracts were awarded [over a six-month period] in the second half of 2001.
Plunging revenues and economic decline have impacted all areas of our state government including education, transportation, health care, safety, the environment, and other services and responsibilities. This is not the time for partisan bickering. Both Democrats and Republicans must work together to find the best solutions to the state's serious, growing budget problems.
The newly formed Commission on Efficiency and Effectiveness in state government, chaired by former Governor Douglas Wilder, will look to see how to make Virginia government more effective and how it can be modernized to reflect the reality of our changing information age economy.
The tasks at hand may sound daunting but we must make tough decisions about how to continue to invest in our infrastructure and maintain our ability to attract businesses that provide high-quality jobs for all of our citizens. This requires a good quality of life. That is why, "We must bring this budget into balance with discipline, innovation, and a willingness to make shared sacrifices for the good of all Virginians," as Gov. Warner has stated.
To be able to continue to improve education, transportation, the delivery of health care, sustained progress, and growth, our budget problems must be solved first. The future of our Commonwealth is at stake.