By Michael Martz Richmond Times-Dispatch
Gov. Terry McAuliffe said Friday that “Virginia stands at an economic crossroads,” as the state prepares to make potentially deeper revenue cuts than the $1.55 billion already earmarked in the current two-year budget.
In opening remarks to the Governor’s Advisory Council on Revenue Estimates, McAuliffe cited the effects of federal budget cuts that have cut into jobs and income related to military contracts, particularly in Northern Virginia and Hampton Roads.
“The economy of the past, where we could simply take the economic benefits of federal government activities in our state, is over,” he said. “We need to discard this entitlement mentality and build an entrepreneurial, innovative and dynamic economy.”
The advisory council, consisting primarily of business leaders and state legislators, then went into private session to consider the economic outlooks prepared by the Virginia Department of Taxation for the United States and Virginia.
The forecasts already have been reviewed by the Joint Advisory Board of Economists, which met last month and adopted a pessimistic forecast of low economic growth and revenues for the state.
The revised revenue forecast is required under the state Constitution because of an estimated $438.5 million shortfall in the fiscal year that ended June 30. That revenue shortfall will have a ripple effect in the 2014-2016 budget that some lawmakers say could exceed $2 billion.
The McAuliffe administration and General Assembly already have earmarked $1.55 billion in revenue reductions for the two-year budget, based on an expected shortfall of $350 million in the last fiscal year.
The additional $88.5 million shortfall could mean up to $180 million in additional budget cuts and the state also could further reduce its forecast for key revenues such as income and sales taxes.
“This marks the first time that revenues have declined in the commonwealth outside of a national recession,” the governor told the council, which includes Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, and corporate leaders such as Thomas Farrell, CEO of Dominion.
“I think everyone here understands the stakes of this meeting and the decisions that will come out of it,” McAuliffe said.