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McDonnell to program some cuts into revised budget

Thursday - 12/6/2012, 7:41pm  ET

AP Political Writer

RICHMOND, Va. - Even if Congress reaches a deficit-reduction agreement to avert the end-of-year "fiscal cliff," Gov. Bob McDonnell said Thursday his amended budget will include some of the $130 million in cuts state agency chiefs recommended a week ago.

McDonnell told journalists attending the 11th annual AP Day at the Capitol that he feels he has to include the cuts because less federal money is coming to Virginia no matter what happens. The suggested 4 percent cuts were submitted to the governor by state agency directors.

McDonnell faces a Dec. 17 deadline for submitting midpoint revisions of the state's two-year, $80 billion budget to the General Assembly, a task he said he will finish Friday. Congress has until Jan. 1 to reach a deal to avert draconian military and discretionary spending cuts, also known as "sequestration."

"Look, there's not going to be a (federal deficit-reduction) deal by Friday, so I've got to go in with the best knowledge that I can," he told a gathering at the state Capitol of journalists from news organizations served by The Associated Press.

"I know that even under the best of circumstances _ even if sequestration is eliminated and replaced in some way _ and even if these (fiscal) cliff issues are resolved, there is going to be less money coming from the federal government for every state in the country, and Virginia will be disproportionately affected because we are disproportionate recipients right now," he said.

Per capita defense spending is highest in Virginia, which is home to the Pentagon and to numerous bases, including the world's largest U.S. Navy base, in Norfolk. The state's economic engine, the Washington, D.C., suburbs, is rich in private companies that rely heavily on defense and government contracts and with households who work for them or directly for the U.S. government.

Democratic Sen.-elect Tim Kaine, who also addressed the event, said he believes Congress is likely to adopt a stopgap before the deadline "to avert some of the most potentially catastrophic effects of the defense and other cuts."

But there won't be a comprehensive deal, he predicted, unless it includes unprecedented spending reductions paired with some tax increases, something Republicans have vigorously opposed. Kaine is not sworn in until Jan. 3, after any automatic cuts take effect and federal income tax cuts enacted under former President George W. Bush expire.

Failure to reach a deal could profoundly weaken general tax revenues that support core state services such as health care, public schools and public safety. With that in mind, McDonnell said his economic advisory panels have all urged him to spend sparingly.

"We can expect a very conservative approach to revenues," he said. "Right now, cash is king. If you don't know what's coming down the pike, then you better have some money in reserve."

McDonnell noted that the state's rainy day reserve fund has more than doubled, from nearly $300 million to about $700 million, since his term began in the depths of a crippling recession.

Not all of the 210 ideas state agency heads offered to McDonnell will make his revised budget. Many of the proposals would cut state aid to cash-strapped city and county governments. One would slice nearly $10 million in support for local officers required by the state constitution, including sheriffs, commonwealth's attorneys and circuit court clerks.

"Doubtful many of those will be adopted," McDonnell said before meeting Thursday afternoon with officials from localities concerned about cuts to state aid that have become a legislative budget-balancing expedient in recent years.

"We've been on a two-year program of looking at unfunded mandates on localities. We killed about 20 of them last, they've given me another report this year, we're going to kill a bunch more," he said. "I complain when the feds do it to me, which they do all the time, so it's fair for them to complain when we do it to them."

McDonnell also has to account in his revised budget for legacy initiatives he hopes to push through the final legislative session of his non-renewable four-year term. He said he plans public education reforms focused on teacher proficiency, and a long-promised transportation plan that would muster about $500 million annually for highway maintenance, freeing up more cash for highway construction projects.

McDonnell would not divulge how he intends to generate the additional money for transportation.

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