RICHMOND (AP) -- Staggered by a slumping economy, Gov. Tim Kaine's administration on Thursday ordered state agencies to curb hiring, travel and purchases, and warned that budget cuts are on the way.

In a letter to legislative budget writers, the administration announced that the state barely finished ahead of expenses for the budget year that ended June 30.

Finance Secretary Jody Wagner said Kaine would propose "significant downward adjustments" to the new 2009 budget when he addresses the House and Senate money committees next month.

It was the strongest warning yet from the state that soaring prices for fuel and food, rising unemployment, continued distress in the housing market and slower income growth will force cuts across state government.

At the same time, Kaine's chief of staff, Wayne Turnage, sent a directive Thursday to state agency directors to immediately curb discretionary spending. He ordered that all new hiring be approved directly by the governor's Cabinet secretaries except for critical jobs in public safety, health, natural resources and higher education.

Kaine was in Europe on a trade mission and not available for comment.

Revenues barely met expenses in 2008 even though the budget had already been downscaled as a result of declining general fund tax collections.

Out of a total general fund budget of $17.2 billion for the 12 months that ended June 30, the state finished with just $5.4 million to spare -- a cushion of just 0.03 of 1 percent.

(Copyright 2008 by The Associated Press.  All Rights Reserved.)