- The Washington Times - Saturday, January 19, 2002

RICHMOND The final phase-out of the Virginia car tax is on hold through 2004 and perhaps beyond, according to legislators and officials within Gov. Mark R. Warner's administration.

During the last week, Democrat and Republican budget writers have been meeting with members of the Warner administration to arrive at a consensus about revisions the Democratic governor will make to the $51 billion 2003-04 budget that former Gov. James S. Gilmore III proposed in December.

But so far the only conclusive result of the discussions is that the car tax will not be fully repealed by the end of 2004, as Mr. Gilmore had planned in his final budget and that the $120 million originally earmarked for the phase-out will go to the general fund.

Administration sources and lawmakers believe there is a chance the car tax will remain through the next budget.

"We don't have the money to do it," said House Appropriations Chairman Vincent F. Callahan Jr., referring to the phase-out.

During his campaign for the governor's post, Mr. Warner had promised he would end the car tax during his term, but Mr. Callahan replied, "It's going to be difficult for him to do."

The full phase-out on the tax on the first $20,000 of a vehicle's value was supposed to have occurred this year. But Mr. Gilmore said last fall that because of the recession, the percentage of the car tax reimbursed by the state and not paid by taxpayers would be 70 percent. If fully implemented, the phase-out of the car tax would cost the state which pays local jurisdictions for the lost revenue about $1 billion a year.

"Everyone wants to be able to cut as much tax as possible. There is also a reality of the things that we deal with. We are charged with the responsibility to manage the people's money the best that we possibly can," said Sen. Charles R. Hawkins, Chatham Republican and member of the Senate Finance Committee. "This budget does not have enough flexibility in it to allow the continuation of a policy to cut taxes that has triggers built in it."

Those triggers do not allow the level of the car-tax cut to go beyond its current level if there is a significant downturn in what the state collects in revenue.

Lt. Gov. Timothy M. Kaine, a Democrat, said he understands the desire to stay on schedule with the phase-out, but he pointed out that the original schedule for elimination of the tax was made when the state was enjoying almost double-digit revenue growth.

"There is a promise made about cutting the car tax and it was all based on revenue projections and revenue growth and it would be wrong to simply when the revenue isn't there to say, "Well let's do it anyway at the expense of all these priorities that pre-existed before the [elimination] of the car tax,'" Mr. Kaine said.

Among those priorities, he said, is funding for education. Mr. Kaine alluded to a recent legislative study that found public education was being underfunded by $600 million to $1 billion annually.

Warner spokeswoman Ellen Qualls predicted the governor would eliminate the car tax by the time he leaves office in 2006.

"Maybe in two years the money will be there," Miss Qualls said. "Whatever the situation is now, it is a mistake to extrapolate that he's not going to be able to do something by the end of his term because the financial picture can change rapidly."

The state faces a $1.3 billion budget shortfall through the end of this fiscal year, which terminates June 30. Another $2 billion deficit looms in the 2003-04 budget. The deficits could actually grow larger, administration sources said, because preliminary revenue figures from January are much lower than expected.

There was a possibility, too, administration sources said, that Mr. Warner may speak to a joint session of the General Assembly for the second time in a week on Monday night so that he can "take another crack" at letting the public know how bad the budget situation is. Mr. Warner must submit revisions to Mr. Gilmore's budget by Jan. 22.

House Minority Leader Franklin P. Hall, Richmond Democrat, said in meetings with the Democratic Caucus and Mr. Warner that cuts to the state budget will have to go "a whole lot deeper" to balance the budget, which is required by law.

"It was mentioned that [publicly discussed budget cuts] are just the beginning," Mr. Hall said. "[Mr. Warner] was trying to prepare the troops for battle."

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