Virginia’s budget is in better shape than lawmakers thought back in August when Gov. Timothy M. Kaine announced that the commonwealth had a $641 million General Fund shortfall to close in the current fiscal year (Fiscal 2008). A combination of new budget estimates, administrative cost cutting and savings identified by the General Assembly could allow the state to end the year, which ends June 30, with a small surplus.

Since Kaine announced his alarming findings, “later reviews and estimates put the gap around $429 million, thanks in part to lower costs for programs like Medicaid and higher than anticipated revenue for the Virginia Lottery,” reports Garren Shipley at the Northern Virginia Daily, citing a recent House Appropriations Committee report.

Meanwhile, Kaine has ordered more than $300 million in administrative cuts this year, and House appropriators have identified roughly $375 million more in savings and cuts. Potentially, the General Fund could end the fiscal year with as much as $219 million to spare, Shipley writes.

In Fiscal 2009, this year’s budget reductions and modest revenue growth should bring the General Fund to within $50 million to $150 million of balancing — even when a $1.1 billion Standards of Quality re-benchmarking is thrown into the mix. By fiscal 2010, the state should return to its normal pattern of budget surpluses.

(You can view the House Appropriations Committee report here.)