Gov. Terry McAuliffe warned Virginia lawmakers Friday to brace for "tough decisions ahead" to address a roughly $1.5 billion budget shortfall driven largely by lower-than-expected income and sales tax collections.
The state will help fill the gap with about $125 million that was supposed to cover a pay boost for state employees, teachers and other state-supported workers, the Democratic governor said. He proposed using another roughly $378 million from the state's rainy-day fund, but the Republican-controlled General Assembly would have to approve that.
And while that money may partially address the state's budget woes, difficult choices about cuts will have to be made, McAuliffe said.
"We cannot assume that the remainder of the fiscal fix will be easy or short," McAuliffe told a joint meeting of the House and Senate money committees. "We must prepare ourselves for tough decisions ahead."
State employees -- who were looking forward to a 3 percent raise in December -- are frustrated, but have been through similar situations because of shortfalls before, said Johnna Cossaboon, spokeswoman for the Virginia Governmental Employees Association.
"We're looking at a high rate of turnover with state employees who have less than five years in, and this isn't going to help that," Cossaboon said.
McAuliffe said revenue for the current-two year budget is expected to be down by $1.2 billion. That's in addition to a shortfall of nearly $280 million carried over from the budget year that ended June 30.
The governor blamed the state's fiscal problems on a sluggish income and sales tax revenue growth.
High-paying jobs lost due to automatic federal budget cuts known as sequestration and to defense spending cuts have been replaced by lower-wage positions, McAuliffe said. At the same time, baby boomers are retiring, leaving behind younger workers who earn less, McAuliffe said. Many other states currently face similar issues, McAuliffe said.
"Just because other governments are experiencing revenue difficulties does not mean that Virginia will be satisfied to be part of the pack," McAuliffe said. "We must focus on the budget actions necessary to keep our great Commonwealth moving forward," he said.
Republican Del. Chris Jones, chairman of the House Appropriations Committee, said he expects McAuliffe's administration will soon notify state agency heads of various scenarios about possible cuts. Both McAuliffe and Republicans said they are eager to protect education funding, but weren't specific about what else might be on the table.
"We'll begin rolling our sleeves up to find a solution to what we face," Jones said.