Virginia’s bleak financial outlook just got gloomier.

Gov. Terry McAuliffe told members of the General Assembly that Virginia is projected to take in $2.4 billion less than it’s budgeted to spend during a three-year period. That’s almost $1 billion more than the shortfall state officials had projected earlier this year.

That means there will be major budget cuts, which McAuliffe, a Democrat, said he’ll announce by the end of the year. The state also will dip into its reserves to close the gap.

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McAuliffe said Virginia needs to back off on its dependence on Washington, D.C., blaming defense cuts to Virginia’s military-heavy Hampton Roads area for much of the downturn.

Even as he emphasized that cuts need to be made, McAuliffe also made it clear he still plans to find a way to use the Affordable Care Act, commonly known as Obamacare, to expand health insurance for Virginia’s poor—and he’s ready to use the power of his executive office to do so.

McAuliffe has asked Health and Human Resources Secretary Bill Hazel to have a plan to expand Medicaid for low-income individuals on his desk by Sept. 1.