UPDATE: Virginia to lay off nearly 600, Kaine says

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Read the governor's proposal for budget cuts.

Those who survive the ax will be furloughed for a day and take a hit on their state-funded pension next year.

Kaine announced the layoffs, expected to save $170 million, and a series of other agency reductions and cost-saving measures to close an expected revenue shortfall of $1.35 billion for fiscal 2010, which began July 1.

It is the fourth time that Kaine has had to make cuts to the current two-year, $77 billion budget. Administration officials said yesterday's cuts bring the total reductions to $7 billion.

More than 1,100 state employees have been forced out of work during the past two years, in addition to about 1,500 workers cut from the Virginia Department of Transportation. The state employs about 100,000 people.

"Like all citizens and all business, we're having to tighten our belts," Kaine said.

About half of the 593 layoffs announced yesterday -- 293 jobs -- will come from closing Department of Corrections facilities in Brunswick County and Botetourt County and the closure of the Juvenile Correctional Center in Natural Bridge.

An additional 183 layoffs will come from agencies under the umbrella of Health and Human Resources, including 70 administrative and 13 care positions at mental-health facilities statewide.

In addition to the 593 layoffs, the state is eliminating 336 unfilled jobs.

Spared in the latest round of cuts is public K-12 education, a priority of Kaine's since he took office.

"We're not cutting anything from public education," Kaine said, adding later: "Goal 1 was to protect K-12 education."

Even without cuts, however, public education will lose about $37 million because of reduced sales-tax revenues, which partially fund schools.

Higher education did not fare as well. The layoffs Kaine announced do not include any potential job losses that could result from funding cuts of roughly $105 million to the state's colleges and universities.

The budgeted reduction for higher education totals $196 million, but Kaine said he expects to receive authorization to use about $91.5 in federal stimulus funding to fill in the gap, reducing a 15 percent cut to about 7.7 percent.

As for possible tuition increases, Kaine said: "Each of the universities will have to wrestle with that."

The governor said Virginia will defer its contribution to state workers' pension fund in the last quarter of the current fiscal year, saving $104 million.

The governor said Virginia and Missouri are the only two states with triple-A bond ratings that fully fund both the employer and employee contribution to its state workers' pension fund. He suggested that shifting some of that obligation could become part of a future plan to address the long-term funding of the Virginia Retirement System.

State employees also will be required to take an unpaid day off on the Friday before next Memorial Day, which Kaine said will save $16.3 million.

The governor has the authority to cut the budget up to 15 percent without legislative approval. Certain spending decisions, such as raising taxes or using money from the state's "rainy-day fund," require legislative approval.

To that end, Kaine proposes using $280 million of the roughly $600 million in the Revenue Stabilization Fund to help close the shortfall. Speaker of the House William J. Howell, R-Stafford, said a rainy-day withdrawal was appropriate and called it "a prudent move."

The governor noted that the state judiciary, legislature and State Corporation Commission escaped the budget ax. Medicaid reimbursements were not cut, nor was eligibility for benefits further restricted. But there were 5 percent cuts to mental-health community service boards and free clinics and community health centers.

"Anything in the safety net was the hardest thing to cut," Kaine said. Funding to local governments, which Kaine said accounts for about half of the state's general-fund allocations, accounted for less than $50 million of the $1.35 billion in spending reductions.

Howell said lawmakers should evaluate the specifics of the proposal thoroughly, a process that will begin in earnest Sept. 21, when Secretary of Finance Richard D. Brown will lay out the plan before the House Appropriations Committee.

Still, Howell said he was encouraged that Kaine did not advocate raising taxes.

Yesterday the two men seeking to succeed Kaine weighed in on the latest round of cuts.

Republican Bob McDonnell chided the administration's "overly optimistic" revenue projections as part of the reason behind the need for "deep and difficult cuts."

Democrat R. Creigh Deeds said: "Today's cuts to services provide a painful reminder of the economic effects brought on by the worst economic downturn since the Great Depression."