Facing more grim economic news, Gov. Timothy M. Kaine has ordered the heads of state agencies to prepare three sets of budgets for 2009-10 reflecting spending cuts of 5 percent, 10 percent and 15 percent.

"The most recent economic indicators suggest even more strongly that we will not reach the revenue collections needed to support the current level of appropriation in fiscal year 2009 and fiscal year 2010," Kaine chief of staff Wayne M. Turnage wrote to agency heads.

Kaine has directed Secretary of Finance Richard D. Brown to reforecast the revenue collections that will fund the two-year, $77 billion budget for July 1, 2008, through June 30, 2010. Turnage's memo says the new figures will be available in early October.

In three rounds of cuts dating to last October, the state already has sliced nearly $2 billion from the fiscal-year budgets for 2008, 2009 and 2010.

"I know this is not the kind of news that you were hoping to receive this fall about the budget," Turnage wrote. "As we start this next round of cuts, it is clear that the choices will be even more difficult."

Six weeks ago, Kaine instructed supervisors to freeze most hiring, halt equipment purchases and cut discretionary travel, while identifying areas where jobs could be cut. The state employs roughly 95,000 people.

The continued slide in the nation's housing market, slow job growth and a "meaningful slowdown" in state collections of payroll-withholding and retail-sales taxes in the second half of the year mean the state is unlikely to collect the revenue needed to fund its budgeted expenditures in 2009.

Turnage's memo says the state's sales-tax collections would have to grow at 4.9 percent to make the fiscal 2009 forecast but grew at an average rate of only 0.8 percent the last four months of fiscal 2008. Income-tax withholding would have to grow at 6.4 percent to make the 2009 forecast but grew at a monthly average of only 1.6 percent during the same period.

Taking a page from Gov. Mark R. Warner's budget strategy in 2002, Kaine has asked department heads to give him three choices of spending plans. Under the Virginia constitution, the governor can make cuts of up to 15 percent per line item while the legislature is out of session.

Turnage's memo echoes Kaine's previous statements that cuts should be targeted and not "across the board."

The memo also reiterates Kaine's priority that "essential services that could compromise public safety, health or welfare" receive greater protection from the budget axe under a separate review.

Contact Jim Nolan at (804) 649-6061 or jnolan@timesdispatch.com.