RICHMOND — Gov. Terry McAuliffe moved Thursday to close an $861.4 million revenue shortfall in this fiscal year by canceling pay raises, tapping the state “rainy day” fund, and making agency budget cuts that include 26 potential layoffs and eliminating nearly 300 vacant positions, primarily in corrections.

McAuliffe also set the stage for a potential budget battle next winter, when he and the General Assembly must deal with an additional revenue shortfall in the next fiscal year, now projected at $654 million.

One of his solutions will be a renewed attempt to use federal money to expand Medicaid, which he said would free up $211 million a year in state funds now spent on mental health, inmate hospital care and subsidizing uncompensated hospital care of uninsured Virginians.

“We can’t continue to leave that money on the table,” the governor said at a news conference Thursday in Richmond.

McAuliffe, who has tried and failed three times …
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McAuliffe budget cuts include 26 layoffs, set stage for new bid to expand Medicaid