Virginia to Feds: Thanks for the Stimulus!

$1B from Feds offsets Va.'s latest loss

RICHMOND, Va. -- Just when Virginia lawmakers thought all hope was lost, some stimulating news arrived from Washington.

More than $1 billion from the federal stimulus package will more than offset the latest drop in state revenue, Gov. Timothy M. Kaine said Monday.

In a memo to legislative money committee leaders, Kaine said the federal infusion Congress approved Friday provides a little more than $800 million for Medicaid and about $216 million in discretionary cash.

The news comes three days after Kaine downgraded projected revenues for the current two-year budget by $821 million, the second such reduction in three months forced by the worst economic nosedive since the Great Depression.

"It will cover the downward adjustment in state revenue ... and put an additional $200 million (through June 2010) into Virginia's budget," Kaine said in a news conference Monday.

That means the state will abandon restrictions Kaine had proposed in December to tighten Medicaid eligibility for the elderly and disabled, including community-based care for the mentally retarded.

Aside from the cash that will course through Virginia's budget, up to $3 billion more is likely to come to Virginia in low-income and middle-class tax cuts, in direct federal aid to local schools and for federal support for road and infrastructure construction, Kaine said.

On Friday, the Commonwealth Transportation Board scrambled to give final approval to a list of ready projects that will qualify for funding under the federal package.

Kaine said questions still remain about how much federal money will be routed directly to local governments and schools. Administrative regulations directing many of those allocations are still being written, he said.

Even though the stimulus puts in about $200 million more than Kaine's downward revenue, Kaine cautioned against assuming the cushion means the overall budget shortfall declines from about $2.9 billion to $2.7 billion.

The reasons, he said, are enormous growth in enrollment in Medicaid that should consume all of the additional federal cash infusion, and the likelihood that the poor economy will force him to lower the official revenue forecast again.

A 15 percent monthly decline in general tax collections for January left the state 5.5 percent short of the revenue forecast on which the state budget through June 2010 is based. The year-to-date decline is the worst on record.

It doesn't reverse cuts in state jobs, program cuts and other savings the state has made already to the budget. It does keep the state from making further cuts to an already austere budget.

President Barack Obama is due to sign the $787 billion federal spending package into law Tuesday.

The news allows Virginia lawmakers to proceed with final revisions to the state's troubled two-year budget.

The House last week passed what was called a "halftime budget" without knowing either the extent of the latest shortfall or the amount of federal cash it would receive in the stimulus bill.

The Senate held off enacting a budget, preferring to await the information.

Copyright AP - Associated Press
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