- The Washington Times - Friday, December 17, 2004

RICHMOND — Gov. Mark Warner yesterday presented lawmakers with a two-year, $62.7 billion budget that includes a $919 million surplus to fund transportation projects, give state workers a 3 percent pay raise and speed up a proposed cut in the food tax.

Mr. Warner, a Democrat who is entering his last year in office, said the Republican-controlled legislature must use restraint when crafting amendments to the 2005-2006 biennial budget, even though many of them want to use the surplus to give residents more tax relief.

“We need to remain steadfast in the fiscally conservative approach that we’ve followed over the past 35 months,” Mr. Warner told a joint meeting of the Senate Finance and the House Appropriations and Finance committees yesterday.

“We will budget the additional projected revenue just like any prudent business would,” he said. “If we can adhere to these basic business principles, I believe we can approach the future with confidence.”

The General Assembly in May passed a $60 billion budget that was funded in part by a $1.38 billion increase in the sales, cigarette and real estate taxes.

The governor said the surplus will be used only for one-time expenses that are “urgently needed,” such as $259 million to cover the increase in health services caseloads and Medicaid costs, or that represent “smart investments” in the state’s future, such as his transportation plan.

Specifically, his budget would reduce the sales tax on groceries from 4 percent to 2.5 percent beginning in July. This would hasten the reduction that lawmakers had proposed phasing in over three years at a cost of $157 million.

The proposed budget allots $107.8 million for a 3 percent salary increase for state workers, faculty, teachers and state-supported local employees next November. Mr. Warner also proposed spending $32.6 million to help cover health insurance premium increases for state workers.

The budget includes $824 million to help the state’s ailing transportation system. The money will go toward public-private partnerships, rail and transit initiatives and to repay the Transportation Trust Fund.

Republicans who fought with Mr. Warner last year over tax increases agreed yesterday that his budget is fiscally sound and on the right track.

House Speaker William J. Howell, Stafford County Republican, called the budget “fair” and applauded the food-tax cut and the pay increase for state workers, who have gone long periods without raises.

However, lawmakers said they wanted to spend the $226 million needed to end the accelerated sales-tax collection procedure, a quick-fix system started in 2002 to balance the budget in which large businesses pay sales taxes based on the previous year’s sales.

Mr. Warner last year proposed ending the accelerated collection so the state would collect the sales tax on a regular schedule, but lawmakers rejected that plan.

Senate Finance Chairman John H. Chichester said he was “pleased” with the budget, with the exception of the “unfair” accelerated sales tax.

“Possibly we can fix it this session,” Mr. Chichester, Stafford Republican, said. “There is a way of doing it.” But the governor said he prioritized in the budget, and noted: “Budgets are about making choices.”

Other highlights include a $229 million deposit to the Rainy Day Fund, an extra deposit that will help the state keep its prized AAA credit rating.

The budget would allot $15.5 million to hire 55 law enforcement officers, 36 commonwealth’s attorneys and 20 forensic scientists for the state’s DNA testing unit.

Mr. Howell said there is unanimous agreement on the food-tax cut and on ending accelerated sales-tax collection but that he does not anticipate any further tax relief this year.

“I don’t know how much further than those two items you can go,” he said. “That’s a lot of money.”

The odd-year session begins Jan. 12 and is scheduled for just 45 days. Lawmakers need only to come up with amendments to the current budget before adjourning.

The 2004 session stretched into a rare overtime period when lawmakers could not agree on taxes.

House Majority Leader H. Morgan Griffith said he does not predict another impasse this year.

“We don’t want it to be a battle,” Mr. Griffith, Salem Republican, said. “But there’s certainly going to be some debate about it.”

Sen. Kenneth W. Stolle, Virginia Beach Republican, said the governor’s proposal reflects “sound, prudent business practices” by not spending the surplus for new programs.

“There is not the pot of gold out there that a lot of people think there is,” he said.

Mr. Warner warned the surplus probably won’t last.

“We will not make spending or tax policy commitments whose cost will show up or escalate in the out years,” the governor said. “And we will not assume that Virginia’s economy will grow at peak performance for years to come.”

The governor, who has made healthy initiatives a cornerstone of his last year in office, allotted $1.6 million to encourage children to eat breakfast at school.

The additional money equates to paying 5 cents for each breakfast sold, which will bring in 20 times the amount of federal funding for breakfast that the state’s schools now receive, he said.

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