Virginia will draw from employee raises and its rainy day fund to help close an estimated $1.5 billion budget shortfall in the two-year budget, Gov. Terry McAuliffe told lawmakers Friday.

Recent job gains have been in lower-wage positions, McAuliffe said, contributing to a lack of sales and income tax revenue.

Revised numbers for fiscal 2017 reduce revenue by about $564 million, McAuliffe told members of the General Assembly’s money committees. He said the state could use about $378 million from the rainy day fund and divert about $125 million from money reserved for pay increases to help address the projected shortfall for fiscal 2017.

The two-year budget totals more than $100 billion.

“We must prepare ourselves for tough decisions ahead,” said McAuliffe, who will provide a comprehensive report to lawmakers in December.

In his remarks, McAuliffe referenced a $1.2 billion shortfall in the biennial budget. However, Republicans quickly noted afterward that didn’t include an already-announced $279 million revenue shortfall for fiscal 2016. When added to fiscal 2017 and 2018, the total reaches close to $1.5 billion.

The estimated shortfall is less than McAuliffe and lawmakers addressed in fiscal 2014, when McAuliffe initially estimated a $2.4 billion shortfall. And the current shortfall is nowhere near the $4.5 billion shortfall the state faced in 2010.

McAuliffe said training students with the right skills for high-paying jobs would be important in making sure companies stay in Virginia, and in helping bring more tax revenue. He also told lawmakers they could soften the shortfall by accepting billions in federal money by expanding Medicaid under the Affordable Care Act.

State Sen. Mark Obenshain, R-Rockingham County, tweeted that he was not moved by the argument that other states like Maryland and New York were facing the same revenue problems.

“Va has dropped from no. 1 to 13 in rankings of best states for business. Why should we be surprised by a corresponding revenue drop,” Obenshain tweeted.

Lawmakers approved the current two-year budget earlier this year with bipartisan support.

This story originally appeared on PilotOnline.com