- The Washington Times - Sunday, February 22, 2004

RICHMOND — Virginia taxes would go up under both of the competing budget plans that emerged yesterday from the money committees of the Senate and House of Delegates.

The Senate Finance Committee’s proposed two-year spending plan relies on about $3.8 billion in tax increases to fund substantial new spending on state services such as public education and transportation.

The Senate’s two-year, $61.5 billion plan includes a sales-tax increase from 4.5 percent to 5.5 percent, higher tax brackets for the wealthy and higher taxes on gasoline.

The House Appropriations Committee endorsed a budget that includes $520 million in new tax revenue created by eliminating exemptions for businesses and industries. It also includes higher fees, the elimination of tax exemptions for some industries and the freezing of any new initiatives or programs.

The budget writers pledge that the House plan will meet basic priorities in education and health care, preserve the state’s fiscal health and protect its coveted triple-A bond rating. The proposal would spare taxpayers the broad-based levy increases proposed by Gov. Mark Warner, a Democrat.

Committee Chairman Vincent F. Callahan, Fairfax County Republican, said the proposed House budget would raise $520 million by eliminating tax exemptions for industries, including airlines, public utilities, telecommunications companies, overseas shippers and railroads. That money would translate into an additional $148.5 million per year for the state’s general fund for two years. The rest would go to transportation and other separate state funds.

“Common sense would seem to dictate that before we consider whether a tax increase is necessary, we owe it to the members of the House and to the taxpayers of Virginia to perform due diligence on the spending side and examine the critical choices we would need to make in a thoughtful and informed manner,” Mr. Callahan said.

“I know that not everyone shares my belief that the budget before us meets the core needs of the commonwealth, but … we cannot continue to be everything for everyone.”

The budget will be finalized in conference committees, held before the session adjourns March 13. The committees, made up of a handful of senators and delegates, will try to reach a compromise between the Senate and House tax plans and budgets that were proposed last night.

The state must pass a balanced budget by June 30 or the government will be forced to shut down.

The cost savings in the House budget proposal would come from keeping the same level of funding for existing programs. Mr. Warner’s proposal, which relied on a $1 billion tax increase, called for increased funding.

In some cases, the level funding would mean the state will not be able to meet enrollment and caseload increases in state-run agencies and departments such as education and health. Frozen funding would likely mean tuition increases for college students.

The House budget also keeps the car tax frozen at 70 percent for the next two years. Mr. Warner’s proposal would have fully eliminated the car tax by 2008.

The budget also is missing the additional transportation funding Mr. Warner had included in his budget. Mr. Callahan said transportation is “vital” to the state’s long-term prosperity; however, he couldn’t “burden the general fund with another obligation.”

The budget relies on a 3 percent price increase on liquor sold at state-run Alcoholic Beverage Control stores; a $3 million sale of an ABC building in Northern Virginia; and the approval of Sunday sales of alcohol at ABC stores.

It also assumes revenue growth fueled by economic recovery, something Mr. Warner said lawmakers shouldn’t count on.

The House budget sets aside enough money to fund a 3 percent raise for state employees and higher education faculty in December 2005, and a 9.3 percent salary increase to state Capitol Police. It also replenishes the state’s rainy-day fund by adding $365 million to it by the end of 2006.

Democrats warned fellow lawmakers to read the budget between the lines because they fear cuts to core services would be harmful to Virginia residents.

House Minority Leader Franklin P. Hall, Chesterfield County Democrat, and Delegate Kenneth R. Plum, Fairfax County Democrat, warned lawmakers Friday against what they predicted would be budget “gimmickry.”

Mr. Hall urged budget writers to “honestly” fund education from kindergarten to higher education.

“The emphasis is on honesty — not simply moving the checkers from one spot on the board to another,” Mr. Hall said during the Democratic Caucus meeting Friday.

Mr. Plum told the lawmakers that this week they would need to become armed with information, including Mr. Warner’s original budget and the so-called “Doomsday Memo” that House budget writers distributed earlier this session. The memo outlined cuts that surfaced in the budget proposed yesterday.

“We’re treading on dangerous ground,” Mr. Plum said.

Mr. Hall later blasted Republicans on the House floor and told them to make sure there is no “train wreck” before the end of the session. “It’s not hard to cobble together a budget with one-time fixes,” Mr. Hall said, urging the budget writers to avoid doing such a thing.

In response, Mr. Callahan told the House the budget would meet all the state’s priorities and that he was “hopeful we’ll all get what we want.”

“All of you will be pleasantly surprised [that you’ll see] the finest budget under the most difficult circumstances in the history of this commonwealth,” Mr. Callahan said.

The Senate on Friday gave final passage to a $3.7 billion tax increase that provides the revenue basis for substantial boosts to education, health care and transportation.

• This article is based in part on wire service reports.

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