- The Washington Times - Thursday, December 21, 2000

RICHMOND The second phase of Virginia's food-tax cut will be delayed and money for Virginia agencies trimmed by $206 million to make up for revenue shortfalls under Gov. James S. Gilmore III's budget submitted yesterday.

Mr. Gilmore, whose proposals drew some fire during his annual December address to the General Assembly money committees, said the state's slower revenue growth about 2 percent less than forecast last year has forced him to make cuts and float bonds to meet the state's needs. But he said that's preferable to halting the fourth phase of his car-tax cut.

"During each of the last three years, our economy has generated double-digit revenue growth. This has enabled us to increase spending on agencies and government services while cutting taxes. But as revenue growth levels out to a more normal level, we must set priorities so we can strengthen core services," the Republican governor said.

The assembly will consider Mr. Gilmore's amendments to the two-year, $48 billion budget they passed last year when lawmakers convene Jan. 10.

Even though the economy and state revenues are growing, they are less than state planners projected last year when they drew up the two-year budget. That's left a shortfall in the second year of the budget that needs to be closed. The task is made tougher because the governor also wants even more spending on education, both in kindergarten through 12th grade and at public colleges and universities.

And though spending on education and social services is popular with lawmakers, they balked at floating bonds and rearranging some finances to pay for the new spending. They also peppered the governor's lieutenants Ronald L. Tillett, secretary of finance, and Scott D. Pattison, director of the Department of Planning and Budget with questions about the governor's putting the car tax first.

"The apprehension a lot of us have … is where will we be in the future, and how will we pay $1.2 billion when this thing is fully phased in," said Sen. Richard L. Saslaw, Fairfax Democrat.

Among the governor's proposals:

n 3.5 percent pay raises for state employees.

n No money, but a recommendation that localities use the $100 million expected savings in what they would have had to contribute to the Virginia Retirement System to fund teacher raises.

n Both need-based and merit-based scholarships for graduating seniors, money for remediation so schools can try to meet the Standards of Learning requirements, and $250 million to add or renovate buildings on college campuses.

n A $600 million bond package to pay for higher-education and other public-works projects.

n Full funding of Medicaid, $12 million to help pay for foster care and adoption services, and more aid for mental health services.

n $138 million in "savings" and $68 million in outright cuts from nonessential departments in state agencies, although public safety, aid to localities, mental health and other direct services to individuals are exempt.

The governor's plans call for the deepest agency cuts in fiscal 2002, even though he leaves office in the middle of that fiscal year. The biggest chunk of the car-tax cut the final 30 percent is scheduled for the year after he leaves office. And by issuing bonds now he will be tying up some money for the foreseeable future.

That has Democrats and some Republicans saying the governor is balancing today's checkbook on future revenues.

"I'm very concerned about whether or not what he's doing is front-loading revenue and backloading costs so he can make his way out and leave us with the costs," said Delegate Robert H. Brink, Arlington Democrat.

"His real legacy to the next governor is not the 'Digital Dominion,' it's the 'Deficit Dominion,' said Steve Vaughn, a spokesman for the Democratic caucus.

The car tax was the governor's big campaign promise in 1997, and even Democrats said yesterday it's not surprising he chose to carry that tax through rather than the food-tax cut, which he and the General Assembly passed in the 2000 session. The law already cut the sales tax on most food from 4.5 cents on the dollar to 4 cents, and would eventually cut it to 2.5 cents if it gets back on track.

Like the car-tax cut, for the food-tax cut to automatically kick in, the state had to meet certain revenue benchmarks. But the food-tax cut triggers are at a much higher threshold a move Republicans shrewdly insisted on last year, and one tangible payoff to their having won a majority in the assembly for the first time ever.

The governor said he would listen if lawmakers find a sound way to pay for the food-tax cut, but failing that, it would be one of the few promises Mr. Gilmore's had to back away from as governor.

Some Democrats are bound to try to push it at the expense of the car tax, especially since it's a way to tweak the governor.

"It's going to be awful hard to explain to the boys down at the barbershop [leaving out] the food tax and teacher salaries," said Sen. Madison E. Marye, Montgomery Democrat. Mr. Marye has already introduced a bill that would continue the food-tax cut.

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