By JIM NOLAN

TIMES-DISPATCH STAFF WRITER

Virginia Gov. Timothy M. Kaine has issued a sweeping series of spending cutbacks in state government in anticipation of budget shortfalls.

Kaine has imposed a hiring freeze on all state agencies except for those jobs pertaining to public safety, health, natural resources and higher education.

Kaine imposed a similar hiring freeze in early 2007, at the first hint of a slowing economy and reduced state revenues. Both hiring freezes restrict the hiring of new employees without approval of the supervising cabinet secretary.

The edicts came in a memo dated yesterday and sent to the heads of state agencies by Kaine Chief of Staff Wayne M. Turnage.

It also warns of possible layoffs.

"I also ask you to critically assess the need for current wage employees to ensure that their continued employment is mission critical," it states.

Kaine is also directing state agencies not to enter into, or renew, consulting contracts unless they are "absolutely essential and critical to delivering services" that can't be performed by the existing workforce.

All discretionary travel and training has been frozen unless it is designated for "mission-critical services."

In addition, discretionary equipment purchases have been suspended.

The memo comes in response to a preliminary report on state revenues prepared by Secretary of Finance Jody M. Wagner.

Wagner's report states that the slowing economy over the last six months mean the state will have to make "significant downard adjustments" in the revenue forecast it used to prepare the state's $77 billion, biennial 2009-2010 budget.

"As he has in the past, the governor is directing each of you to immediately take steps to reduce discretionary spending," states Turnage's memo, a copy of which was obtained by the Richmond Times-Dispatch.

"This will undoubtedly result in some short-term difficulties for your agency, but given the nature of our fiscal situation, it is critically important that we implement strategies that hold the promise of long-term savings."

Virginia ended fiscal year 2008 on June 30 with a tiny budget surplus. A memo today from Wagner to Kaine warns that "significant downward adjustments to the revenue forecast for the current biennial budget cycle that started July 1, 2008, are to be expected during the fall revenue forecasting process.

"Declining employment levels, slower income growth, lower consumer confidence, and the continued downward trends in the housing market" drove the revenue shortfalls, Wagner said.

Wagner's memo further states that state agencies should expect "further budget adjustments" to compensate for the expected reduction in general fund revenue.

On Aug. 18, Kaine is scheduled to address the joint meeting of the House Appropriations Committee, the House Finance Committee and the Senate Finance Committee to review the final results of 2008 year revenues and address anticipated shortfalls in the coming two-year budget.

Wagner said preliminary data suggest the state ended fiscal year 2008 with a small budget surplus of $5.4 million. But the downward economic trends point to the need for action.