Fairfax County will see the first drop in overall real estate revenue since 1994 for the fiscal year beginning next July, leaving the government and school system each facing $120 million shortfalls, budget planners predict. The pessimistic forecast was revised from earlier numbers that predicted a slight increase in tax revenue for fiscal 2009. The drop is expected to be small — only a half a percentage — but nevertheless presents an added challenge to agency heads as the cost of running a government continues to climb.

“It’s going to be tougher for them to manage within their resources,” Deputy Fairfax County Executive Ed Long said.

Program expansions, for the most part, appear to be out of the question. The school system is facing a projected $127.7 million deficit that could halt planned growth in foreign language instruction and full-day kindergarten.

“It will be difficult to implement those with no new money,” school board Chairman Dan Storck said.

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The downward slide is part of what is expected to be a years-long trend of flat revenues brought about by the housing market downturn. The largest part of the county’s general fund is paid for through real estate taxes.

Residential values are expected to fall 4 percent next fiscal year, compared with only 0.33 percent this year. Commercial and other types of land, whose values rose strongly this year and kept the county out of the red, are expected to increase only about half as much.

Braddock District Supervisor Sharon Bulova, the board’s budget chair, worried about staffing new facilities — such as libraries slated to open next year in Burke and Oakton.

“We need to make some changes,” she said. “And that will be done via belt-tightening, as well as a very serious look at our services and programs, both on the school side as well as on the county side.”

The county’s Department of Management and Budget does not expect program reductions will be needed, according to a July 23 memo from the department’s director to agency heads.

wflook@dcexaminer.com