- The Washington Times - Tuesday, January 22, 2002

RICHMOND Virginia Gov. Mark R. Warner said yesterday that the state faces an additional $300 million in budget shortfalls, with administration officials noting that the Democratic governor's budget proposed today is likely to include scaled-back tax credits, deductions and exemptions.
The governor's plan was immediately criticized by some state Republicans as tax increases in disguise.
"Of course, they are tax increases," Republican Party Executive Director Ed Matricardi said of any plan to eliminate the tax breaks. "He is talking about taking more money from the people of Virginia when we are in an economic downturn. Taking more money out of people's pockets at a time of economic uncertainty is not a prudent economic-development plan."
Mr. Matricardi also pointed out that many of the tax breaks were for some of the state's most needy residents and special interests, such as low-ranking military members, senior citizens and tobacco farmers.
"Mark Warner wants to balance the budget on the backs of the most vulnerable residents of Virginia," Mr. Matricardi said.
Mr. Warner said his plan is necessary because the state's financial situation is worsening.
"It is only prudent to make adjustments as soon as possible," Mr. Warner said.
Citing lower-than-expected tax collections so far this month, Mr. Warner told reporters before speaking at a Martin Luther King Day celebration here that instead of the state being in the hole by $3.2 billion through 2004, it would face a $3.5 billion shortfall.
"We are going to have to find [additional] ways to tighten our belt," Mr. Warner said.
Mr. Warner is calling for extending the car tax through 2004. Gov. James S. Gilmore III, a Republican, had proposed eliminating the tax by the end of his 2003-04 budget.
Mr. Warner must submit his revisions to Mr. Gilmore's budget by the end of today.
Administration sources say Mr. Warner will propose amendments that reduce the percentages of some of the 50 tax breaks created since 1995.
The breaks account for about $600 million a year in revenue the state does not collect.
Mr. Warner said on a Richmond radio show that he also may have to roll back some of the tax breaks to balance the budget, along with layoffs and forgoing pay raises for state employees, including teachers and sheriff's deputies.
Included in the budget Mr. Warner will present today will be a consolidation of state agencies, programs and services that will mean more layoffs as well, sources said.
Part of the $650 million of Transportation Trust Fund money Mr. Gilmore had proposed transferring to the general fund to fill the budget gap also will be used, sources said.
"We will accept some of the one-time Gilmore fixes," one source said.
Some of the other "fixes" include using $467 million from the nearly $1 billion "rainy day" fund.
The state has a $1.3 billion shortfall through the end of this fiscal year that ends June 30 and another $2 billion through the next two-year budget cycle. Mr. Warner also has cautioned that the state could face about $5 billion in shortfalls through 2005.
Mr. Warner's proposals have dampened the bipartisan spirit on display here earlier this month during the inauguration.
Republicans, who control the General Assembly, are adamant about cutting the car tax by the end of 2004 and giving state employees pay raises, sources said.
House of Delegates Speaker S. Vance Wilkins, Amherst Republican, said Mr. Warner's goal of unity was laudable, but he said every delegate and senator would have a say on the budget.
"I think that we will certainly look at his budget amendments," Mr. Wilkins said. "But I don't know if we are just going to endorse wholesale amendments that we haven't had the time to put in the context of the entire budget."
House Majority Leader H. Morgan Griffith, Salem Republican, agreed.
"It's awfully early in the process to be locking things down," Mr. Griffith said.

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