Those simple facts will be hard to remember at times this week as Gov. Timothy M. Kaine issues new revenue estimates -- most likely lower -- and the money committees rush to complete work on their versions of the next two-year budget by Feb. 17. But level-headedness is key.

To be sure, no one in Virginia government was thrilled in August 2007 to hear Gov. Kaine project a $641 million drop in expected state revenues for the current 2008 fiscal year. And there is even less excitement today at the prospect of subtracting another $200 million-plus in revenue, primarily due to continued weakness in the housing market.

For the record, the total Virginia biennial budget is about $78 billion for these two fiscal years, but lawmakers have only $17 billion to $18 billion per year to program through the General Fund.

The budget that Gov. Kaine termed “stand in place” two months ago already incorporates a round of efficiencies and savings and a $261 million drawdown from the revenue stabilization fund, whose balance now exceeds $1.2 billion. Implementing additional savings in the four months before the fiscal year ends June 30 will be difficult, particularly as over 90 percent of new revenues cover increases in current services such as the public school Standards of Quality, Medicaid, new jails, debt service, state employee retirement, etc.

Budget imperatives and political pressures could set up a tug of war over whether to tap more of the revenue stabilization fund than Gov. Kaine has proposed. Some may debate whether Virginia is getting wet from a fiscal rain, is being drenched in a storm or is floating in full flood. But a review of the history of the fund and the rules that govern it suggest that drawing down the fund may be the most reasonable, responsible policy decision.

Much of the history and rules that follows were reviewed by the Auditor of Public Accounts before a Senate Finance subcommittee in January. The General Assembly established the revenue stabilization fund in 1992 and Virginia voters approved a constitutional amendment incorporating rules for deposits, withdrawals and the maximum size of the fund in November of that year. In 2003 the General Assembly added legislation that requires an additional deposit to the fund if certain conditions exist. Fiscal 2006 is the only year so far that has triggered a statutorily required deposit in addition to a constitutionally required one.

Two withdrawals have occurred in recent years from the fund: $467.7 million in April 2002 and $247.5 million in June 2003, difficult years in the post-9/11 recession. Deposits since then have built the fund back up to $1.2 billion.

According to the rules, funds can only be used when General Fund appropriations based on previous forecasts exceed expected revenues in subsequent forecasts. These are precisely the circumstances that exist in February 2008. A withdrawal, however, cannot exceed one-half the difference between the appropriations and a revised revenue forecast, such as the one Gov. Kaine will make this week, and a withdrawal cannot exceed half of the balance of the fund.

These rules suggest that if estimates of an additional $200 million shortfall in the revenue turn out to be true this week, the Commonwealth could withdraw between $361.1 million (half of the calculated shortfall) and $594.9 million (half of the balance in the fund). Doing so would allow the Commonwealth to continue important investments in education, higher education, research, public safety, mental health, even transportation.

At the same time there are deposits pending for the revenue stabilization fund, $114.8 million due in Fiscal 2008 related to tax revenues from FY2006, and $21.3 million already due in Fiscal 2009 related to tax revenues from FY2007. These deposits begin to rebuild the fund for the future.

Gov. Kaine already has trimmed the state workforce and instructed cabinet officers to fill only the most essential vacant positions. The House Appropriations and Senate Finance Committees, which must report their own set of budget amendments for Fiscal 2008 and Fiscal 2009 by Sunday, Feb. 17, already have been considering spending reductions, including how to say "No" to most of the more than $3 billion in additional spending proposed by members of the House and Senate in their own budget amendments.

Along with adopting more conservative estimates of revenue growth in future years, neither the governor nor the General Assembly should hesitate to make revenue stabilization funds a part of their budget balancing exercises. The express purpose of the fund is to level out the annual swings in state government revenue estimates and actual revenues. Call it level-headedness.