- The Washington Times - Friday, January 12, 2001

RICHMOND Virginia Gov. James S. Gilmore III's plan to close the hole in the state budget failed its first test yesterday when the Senate Finance Committee rejected his idea to take the state's tobacco settlement in an up-front lump payment.
The committee's move doesn't automatically prevent the governor's car-tax cut from moving to the next phase, but it does mean he and lawmakers will have to find the money somehow if they are to go forward with increasing the rebate to 70 percent this year.
The committee voted 15-1 against the plan, with the sole vote for it coming from Sen. Charles R. Hawkins, Pittsylvania Republican and the man who sponsored the two bills that contained the governor's plan.
"I think the Finance Committee was saying to the governor: 'We don't appreciate the games you're playing,' " said Sen. Janet D. Howell, Fairfax Democrat.
Still, Mr. Gilmore told reporters afterward that he is optimistic the car-tax cut will go through.
"It's early days, yet. This is only day two of a 46-day session. Let's see what they come up with to maintain the car-tax cut and support education, and we'll look at that," the Republican governor said. "I said last night we've got an open mind on their approaches, and I mean it. So let's look and see what they want to do."
State revenues are coming in substantially below last year's predictions, leaving a $218 million gap to be closed in the $48 billion, two-year budget. In addition, the governor proposed $457 million in new spending, creating a shortfall of $675 million.
Mr. Gilmore has proposed to close it with a series of agency cuts and by "securitizing" a portion of Virginia's share of the Master Settlement Agreement between cigarette makers and the states. That means selling off the rights to future revenues from the agreement in exchange for an up-front payment now. The up-front payment would mean the state would have to take a discount on the total it gets.
One-tenth of the tobacco settlement is earmarked for health care, 40 percent is not designated and goes into the state's general fund and the rest goes to the state tobacco commission, to be spent to prop up Virginia's tobacco-growing areas. The commission voted earlier this week to back securitization as a sound financing method.
But some lawmakers, rather than make agency cuts and use tobacco money, want to freeze the car-tax rebate at last year's rate of 47.5 percent to close part of the budget gap. They were critical of the governor's cuts yesterday, which range from reducing aid to localities to reducing enrollment projections and capping spending on a plan to insure uninsured children.
Mr. Hawkins told lawmakers that they shouldn't confuse any dislike of the budget and of continuing the car-tax cut with securitization. Rather, he said, taking an up-front payment on the tobacco money is just sound economics given the current health of the cigarette industry.
"To gamble the continuity of these monies flowing into the tobacco commission year after year is a gamble I will not take," he said.
But committee members said they don't believe taking the money now gets a good enough return, and they would prefer to have the yearly payments.
After the vote, Mr. Hawkins walked up to Delegate John H. "Jack" Rust Jr., Fairfax Republican and the man who is sponsoring the same bill in the House, and simply said, "Good luck."
Securitization, however, is not dead. Mr. Rust is likely to have better success in the House, which was much more receptive to securitization last year, and whose members have been more open to it this year. Still, any plan that gets through the House will have to go back through the Senate Finance Committee again.

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