With the recent terrorist attacks on Sept. 11 causing the Virginia - and especially the Northern Virginia - economy to go into a further slump, state revenue has fallen much lower than previous budgets projected.
According to numbers released Monday, Virginia revenue was down 2.4 percent in the first quarter of the state's budget year running from July through September. In September alone, tax collection was down 8.4 percent.
"The amount of money coming into the government has declined dramatically," said Larry J. Sabato, a government and foreign affairs professor.
Economic growth has declined from about 7 percent to zero, Sabato said.
This could have serious implications for state funding for higher education and the University.
Because of Virginia law, the state must operate under a balanced budget. Although the state may spend some money in times of deficits from a rainy day fund, the Virginia government may not go into debt in any given month.
"The governor has to have a balanced budget," said Colette Sheehy, vice president for management and budget at the University. The governor will have to cut expenses if the budget is not balanced.
Possible future cuts may affect higher education funds in Virginia because it takes up a significant portion of the budget and is a discretionary part of the state budget that can be cut, Sheehy said.
"I think the economic picture does not look very good," Sheehy said.
School deans who help oversee personnel decisions and budget allocations already have been alerted to the potential shortfalls in the budget, said Leonard W. Sandridge, the University's executive vice president and chief financial officer.
However, Chris Freund, Gilmore's assistant press secretary, said it is a little soon to start worrying and making decisions regarding the possibility of future cuts.
The governor does not have to propose his two-year budget plan until December, and his office is taking the "wait-and-see" approach to the economy, Freund said.
"Budget reductions in times of economic slowdowns are not new to the University," Sandridge said.
Similar circumstances existed in 1991 when former governor Douglas Wilder was forced to cut higher education faculty salaries by 2 percent.
The University already has struggled through one financial complication this year because of a budget freeze this spring that prevented faculty from receiving salary increases. The budget freeze ensued after the General Assembly failed to pass a new budget resolution before the end of its term. Since then, supporters of higher education throughout the state have clamored for more funding for instructors in higher education.
Normally, the best opportunity for an increase in University teacher salaries, which are already relatively low compared to peer institutions, is a caboose bill to retroactively increase salaries, Sabato said. Another possibility for new funds during an economic slowdown is through University bond issues; however, the process to obtain these can be very difficult, he said.
One aspect of the budget that probably will not change is a reinstatement of the car tax, which already has been reduced by 70 percent. One of Gilmore's main goals as governor was to cut the car tax by 100 percent.
"There is zero chance of it moving below 70 percent," Sabato said.
The upcoming gubernatorial race also has implications regarding the budget. Either Democratic candidate Mark R. Warner and Republican candidate Mark L. Earley will be able to make significant changes to the budget regarding appropriations to higher education.
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