- The Washington Times - Saturday, January 5, 2002

RICHMOND Gov.-elect Mark R. Warner yesterday told a bipartisan group of state lawmakers that Virginia faces as much as a $6 billion budget shortfall through 2006.
Mr. Warner, a Democrat, said layoffs of state employees and the elimination or rollbacks of tax credits, deductions and exemptions are possibilities in patching the budget shortfall.
"Everything is on the table," Mr. Warner told reporters at a news conference yesterday in response to questions about how his administration plans to balance the budget despite a $3.2 billion shortfall forecast through 2004.
Before the news conference, Mr. Warner had met with the group of 12 senior delegates and senators.
The purpose of the meeting, said one lawmaker who attended, was to build trust between the incoming governor and Republicans, who control both chambers of the General Assembly.
"It was a very frank discussion of how we could work together," the lawmaker said.
During yesterday's news conference, Mr. Warner said, "We are looking at a [budget] problem bigger than the current budget cycle that will affect the out years," even with an economic recovery.
Outgoing Gov. James S. Gilmore III, a Republican, last month forecast that the state would be $2 billion in the hole during the 2003-2004 budget, on top of the $1.2 billion shortfall expected for the remainder of fiscal 2002, which ends June 30.
Mr. Gilmore called for 2 percent across-the-board cuts in state agency spending but did not propose to lay off state employees. But Mr. Warner did not shy away from the idea, saying that although he has "great respect for state employees," jobs could be lost in his quest to shore up the budget.
About 50 special tax credits, deductions and exemptions totaling about $600 million approved by the General Assembly and past administrations during the last seven years also could be fair game, Mr. Warner said.
The current budget was based on an estimated 6.9 percent economic growth, but there is now negative 1.6 percent economic growth, Mr. Warner said.
Many of the tax breaks and deductions have "sunset" provisions that call for them to expire soon, and Mr. Warner seemed to indicate he would favor tapping them for revenue. But some administration sources said Mr. Warner may consider rolling back some tax breaks or deductions, especially those benefiting businesses, because such a move would have less effect on the average Virginian and would provide more cash.
Administration sources also said among 50 items being considered are several individual and corporate tax deductions, tax exemptions for Internet-service providers such as America Online, and repeal or elimination of the sales tax on food.
Mr. Warner said his job is to get Virginia's "fiscal house in order" and that that may mean "more pain" in the short term.
He said there are some "one-time" fixes, such as using part of the state's nearly $1 billion rainy-day fund. But basing the state's budget on the "unreasonable expectations" of double-digit growth as Mr. Gilmore did, he said, is a recipe for future failure.
House of Delegates Speaker S. Vance Wilkins Jr., Amherst Republican, who met with Mr. Warner and the other lawmakers, said "there is no choice" but to try to avoid a budget stalemate like last year's, where legislators returned to their districts without amending the budget and Mr. Gilmore had to make $421 million in cuts to balance it.
Other lawmakers agreed with Mr. Wilkins.
House Majority Leader H. Morgan Griffith, Salem Republican, said it was a "good … bipartisan discussion" between the lawmakers and Mr. Warner. Delegate Franklin P. Hall, Richmond Democrat, echoed that sentiment.
"It was to see if we could find some common ground," Mr. Hall said.

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