Tuesday, November 24, 2009
Kaine: New taxes possible
The outgoing governor is trying to draft a budget proposal as his successor looks on.
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RICHMOND -- Gov. Tim Kaine said Monday that protecting "core" state services will be his top priority as he drafts a proposed budget for the next two fiscal years, and he has not ruled out recommending tax increases despite certain opposition from his successor.
"Everything is on the table," Kaine told reporters after meeting with a panel of business leaders and lawmakers whose input helps shape the state's official revenue forecast.
Kaine will leave office in January, but not before giving legislators proposed spending plans for the remainder of the current budget cycle and the two-year period that begins July 1, 2010. Lawmakers and other state officials expect the cumulative shortfall for the entire period to exceed $3 billion, a view shared by several who participated in Monday's meeting of the Governor's Advisory Council on Revenue Estimates.
Kaine, a Democrat, will turn over power to Republican Bob McDonnell on Jan 16. McDonnell reiterated Monday that he opposes tax increases as part of a plan to manage the state through the fiscal turmoil that has forced about $6 billion in cuts during the current budget cycle. Republicans in the House of Delegates, who expanded their majority in Nov. 3 elections, also oppose tax increases.
"In this economic situation, I certainly think we do not want to impose any new taxes on Virginia businesses or families," said McDonnell, who attended Monday's closed-door revenue meeting and later met privately with Kaine.
McDonnell and lawmakers can overhaul the budget proposal Kaine will deliver to the General Assembly's money committees next month and can reject any proposed tax increases. But they also could face the prospect of making deeper spending cuts than those Kaine will propose.
Legislative analysts said last week that Medicaid costs account for a large percentage of the projected shortfall over the next two years. In addition to an increased utilization and inflation of the health care program, the state faces a gap of at least $1.1 billion as federal economic recovery funds for Medicaid expire in the next biennium, according to a briefing for the House Appropriations Committee.
Last December, Kaine proposed doubling the state's cigarette tax to 60 cents per pack to help cover Medicaid costs, but failed to win support in either chamber of the General Assembly. He would not say Monday whether he would make another attempt to increase that tax or seek increases to other levies when he presents a budget plan to lawmakers in December. But he noted that his administration has so far balanced the budget entirely through cuts and savings.
"You're going to see a lot of adjustments to Medicaid," Kaine said. "You're going to see adjustments to K-12 [public schools] and higher ed. You're going to see adjustments to virtually everything in state government in this budget. But we're looking at all of our options."
Kaine said his budget plan will "protect the core services that Virginians rely on, especially in a tough time" and preserve the state's AAA bond rating. He also said that budget cuts he imposed in September would be continued in the spending plan he delivers next month.
House Majority Leader Morgan Griffith, R-Salem, said an attempt by Kaine to increase taxes would be "a political move" that contradicts the message sent by voters earlier this month, when Republicans swept all three statewide offices by wide margins and gained House seats.
"I don't think there's any question that the public wanted to retrench and there's not a bunch of folks out there advocating that we raise taxes," Griffith said.
Kaine said politics won't guide his budget decisions.
"I'm not looking at the November election results in terms of what I should do," Kaine said. "I'm just looking at what I think is the right thing to do after listening to a lot of really smart people."
