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Governor cuts budget by $1.35 billion

Regional jail remains on Richmond's list of projects to fund despite shortfall

By Garren Shipley -- gshipley@nvdaily.com

Richmond's commitment to pay half the cost of a regional jail for Shenandoah, Warren and Rappahannock counties is safe, according to Democratic Gov. Timothy M. Kaine.

For now.

Kaine announced more than $1.35 billion in cuts to the state's fiscal 2010 budget Tuesday, the first step in his effort to deal with overly optimistic revenue estimates coupled with the steepest dive in tax collections in more than 40 years.

State revenue dropped more than 9 percent from fiscal 2008 to fiscal 2009.

"There is no change on [the regional jail] with respect to fiscal year '10," Kaine said, speaking on a conference call with reporters. "Everything I've talked about today is an FY '10 matter."

The three counties have been hammering out plans for a regional jail for several years.

Legislators have granted the localities an exemption to a long-standing moratorium on jail construction, and have pledged up to 50 percent of the construction costs.

But capital construction projects that are not already under way could find themselves in the budget-cutting cross hairs unless the commonwealth's fiscal picture starts to improve in short order.

"The other decisions about FY '11 and '12, this is not an item we've talked about. We haven't brought that up yet," Kaine said.

"But I guess it would be safe to say that everything is under analysis for '11 and '12," he said.

Kaine's cuts spared K-12 education, but it could give local governments a significant headache in 2011 and 2012 in the form of higher contributions to the state's public employee retirement program.

"We will be increasing the combined contribution from employee and employer shares in the FY '11 and '12 budget," Kaine said.

Increasing payments to the Virginia Retirement System have long been a headache for local government budget writers.

"When times are good and the investment income is rolling in the door, sometimes you can decrease the total contribution," he said.

Times have been anything but good for the retirement plan for the past year. VRS closed the year ending March 31 with a loss of just under 30 percent.

Losses in the stock market and other investments have left the fund less than fully funded in the long term.

A legislative study released in July warned that the program will be only 65 percent funded for state employees and 61 percent funded for teachers by 2012 unless legislators start putting more money into it.

"Virginia is in a pretty good place on the funding of our plan, according to bond agencies," Kaine said.

But higher payments are coming.

"Sometimes you need to increase [contributions], and because of the economic conditions, you'll be seeing the combined share increase from somewhere 14 to 15 percent from 11.2 percent in the next biennium," he said.

"That's one way you get back to full funding," he said.

Kaine also said that state employees will start paying into the fund for the first time in more than two decades.

At present, Richmond pays both the employer and employee share of the retirement costs, an oddity among states, according to Kaine.

"This issue of having the employee pick up some portion of the employee share is a good move for the long term stability of the funding of the VRS," he said.

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