Kaine hints of Virginia tax hikes

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By Sarah Abruzzese

Virginia Gov. Tim Kaine emerged from a closed-door meeting with his top economic advisers Monday, saying that to offset a projected budget shortfall next year, he may have to raise taxes -- a prospect quickly dismissed by Gov.-elect Robert F. McDonnell.

After meeting with his Advisory Council on Revenue Estimates, Mr. Kaine said he won't take anything off the table when it comes to fulfilling his responsibility to protect the state's AAA bond rating, providing Virginians with necessary services and keeping the state competitive to attract business.

The purpose of the meeting was to set revenue projections that will be used along with November's tax-collection tally to create the biennial budget for 2011-12. Mr. Kaine will present the budget to the General Assembly in December - a month before Mr. McDonnell takes office.

"People are going to see an awful lot in this budget that they don't like," Mr. Kaine said. "But, look, people are doing it in their families and doing it in their businesses. They're having to make tough decisions."

Mr. McDonnell, who takes office in January and also attended the budget briefing, told the Associated Press that he would keep his campaign promise and not raise taxes.

"The governor-elect has made clear he will not raise taxes," said McDonnell spokesman J. Tucker Martin. "He has expressed his position both publicly and privately. Gov.-elect McDonnell understands Virginians are struggling with the worst economy in decades and a tax hike would only exacerbate their financial distress, and impede any possible economic recovery."

Mr. Kaine said his spending plan will include the majority of cuts he has already implemented, which allowed him to trim $7 billion from the $80 billion two-year budget. Future cuts will include all levels of education and Medicaid.

However, Mr. Kaine told reporters after the meeting that he thought the state forecast by the Richmond Federal Reserve president, who said Virginia needs to cut an additional $250 million from the budget and be prepared for a $3 billion shortfall in the next two years, will probably hold true.

The outgoing governor proposes the budget. But Mr. McDonnell, who has said he will veto any tax increase, will work with the General Assembly to agree on an acceptable final budget.

Mr. McDonnell, who attended the meeting with Lt. Gov. Bill Bolling, also met privately with Mr. Kaine for the first time since winning the governor's race earlier this month.

The incoming and outgoing governors have spoken by phone and made a joint public appearance in Fairfax last week. The two teams say they are working closely to smooth the transition.