While the "great recession" of 2007-09 appears to be ending in a technical sense, the worst is yet to come for Virginia's state and local governments. In the 2010-12 biennium, the state budget will experience the full force of the worst economic downturn since the 1930s, writes James J. Regimbal Jr., a leading expert on government finance policy. As a result, even more painful changes and severe cuts to state-funded programs will be coming, he warns. Regimbal points out that state finances, already facing sharp reductions, have been shielded by cash balances built up from better days, the deferral of various state obligations and payments, and, most importantly, the receipt of federal stimulus funds. He notes that in the proposed 2010-12 general fund operating budget, the amount needed just to maintain current state services is still at least $3 billion higher than expected revenues.
What options are left for state officials and the next governor? First, says Regimbal, "do everything possible to encourage job creation in Virginia by prioritizing Virginia's investments in education and improvements to our infrastructure. A healthy economy is the only long-term answer to a healthy public sector." Virginia's government is going to continue to get smaller and even core programs are going to be reduced further, he warns. Finally, he says, Virginians will soon have to decide whether their current tax structure and rates "are adequate to sustain a high-quality public education, public safety, health and welfare, and transportation system that Virginians have come to expect."
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