Region's lawmakers predict more budget cuts to come

Despite current revenue surpluses in Virginia and Tennessee, lawmakers from both states predicted Tuesday that additional budget cuts will be needed when state legislatures return to session this month.

Federal health care mandates, possible reductions in federal services and – in Virginia – addressing long-delayed state employee retirement costs – could offset any gains that both states made during the current fiscal year, a panel of lawmakers said during a legislative breakfast hosted by the Bristol Chamber of Commerce at King College.

“Our revenue stream has been increasing for the past nine months and right now we have a $500 million surplus, but that is money that is already spent,” state Delegate Joe Johnson, D-Abingdon, told about 60 community leaders from both states. “Our biggest concern is what happens if the federal government cuts programs. If that happens, money will have to be cut in Virginia. There are mandates from the federal government on Medicaid and Medicare that the feds are not funding, so those costs will be increasing.”

Johnson praised Virginia Gov. Bob McDonnell’s proposed biennial budget, which includes more money for higher education and tourism, but predicted that not all those increases will make it through.

If federal officials make substantial cuts to defense spending, it could have a huge impact on Northern Virginia communities, where thousands of those employees live and work, Johnson said.

Incoming Virginia 5^th District Delegate Israel O’Quinn expressed concern about the state’s retirement system, which was shorted $620 million in 2010 to balance the state budget. That concern, O’Quinn said, has nothing to do with previous efforts to make state employees pay a larger share into the system. Last month, the governor proposed paying $2.2 billion into the retirement system during the next two years.

“There is a governor’s proposal and a Senate proposal but funding that program takes money,” O’Quinn said. “That has gone unfunded for a long time and we can’t continue to let it go unfunded.”

While the state is required to make payments into the retirement system each year, the $620 million must be paid back with interest over 10 years, starting in 2013.

Revenues in Tennessee are also running ahead of projections, but that can be deceiving, Lt. Gov. Ron Ramsey, R-Blountville, said.

“The projections were very, very conservative. We were projected to grow at 1.9 percent and we grew at 2.3 percent. If we’d projected 3 percent growth, we’d be behind.”

Over the past two years, Tennessee has relied on federal stimulus money and rainy-day funds to help balance its budgets – but both have expired, Ramsey said.

Tennessee state Rep. Jon Lundberg, R-Bristol, said his state’s shortfall could reach $500 million, depending on the financial impact of the federal health care legislation, which is scheduled to take effect in 2013.

“Obamacare, or whatever you choose to call it, could have a huge impact on the state because of Tenncare,” Lundberg said. “Parts of it could be overturned by the [U.S.] Supreme Court, but that remains to be seen.”

The Virginia General Assembly returns to Richmond next Tuesday and Tennessee lawmakers begin their session in Nashville next Wednesday.

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