Saturday, December 19, 2009
Kaine proposes sweeping changes
The governor's proposed budget calls for an income tax increase to minimize funding cuts.
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RICHMOND -- Gov. Tim Kaine handed state lawmakers a two-year budget proposal Friday that calls for a major change in tax policy and more deep spending cuts to offset a $4.2 billion shortfall, and his efforts drew sharp criticism from the Republican who will succeed him and from GOP legislators.
With just four weeks remaining in his term, Kaine called for an end to the state's car tax relief program and the complete abolition of the local personal property tax that localities levy on vehicles. Localities that eliminate the personal property tax instead would receive the proceeds from a new 1 percent income tax "surcharge" that would generate $2 billion by the 2012 fiscal year.
Kaine called for the tax changes in order to avoid even deeper cuts to state programs than the $2.3 billion in cuts he proposed Friday. The cuts will affect schools, colleges, law enforcement and social safety net programs and result in 664 layoffs and the elimination of more than 1,800 vacant government positions.
Kaine's plan would close geriatric and adolescent units at Southwestern Virginia Mental Health Institute in Marion. It would reduce mental health funding for local community services boards by $12.2 million, affecting mental health crisis stabilization services such as involuntary commitments. The state increased funding for such services in response to the Virginia Tech shootings.
But Kaine told members of the General Assembly's budget and tax policy committees that there were limits to how deeply he would cut.
"I conclude that more cuts to education, public safety, health care, state employees and other core services would be directly contrary to the current and future needs of the commonwealth," Kaine said.
Gov.-elect Bob McDonnell and Republican legislative leaders denounced the proposed tax increase and signaled that they will overhaul the outgoing governor's budget.
"It is bad economic policy to increase taxes on Virginians, especially as they continue to struggle with the worst economy in generations," McDonnell said in a statement released by his transition office. "Families and businesses are making strategic reforms and deep cuts, and government must do the same."
McDonnell also questioned Kaine's decision to cut public safety funding, but he gave little indication of the alternatives he will pursue after taking office Jan. 16.
Kaine's proposal would end the $950 million annual payments the state makes to local governments to reduce the personal property tax on the first $20,000 of a vehicle's value.
The state implemented the car tax relief program nearly 12 years ago, launching a popular initiative of then-Gov. Jim Gilmore. But lawmakers capped spending for the program in 2004. And, Kaine said Friday, "not a single legislator of either party has ever come to me to say that we need to move forward and completely get rid of the car tax."
"This line item has stayed in the budget without any legislative champion for only one reason--political expedience," Kaine said. "Well, in a time when tough choices have to be made to keep Virginia in a strong leadership position, political expedience is not a sufficient rationale for continuing this $950 million folly."
Kaine said the income tax increase would give localities more revenue diversity and greater ability to deal with state funding cuts. But Republicans called the tax increase proposal unacceptable and said it will hamper lawmakers' ability to balance the budget.
"If he was serious about that, if he really thought that's what was right for Virginia, he should have proposed it in year one, year two, or year three," said House Majority Leader Morgan Griffith, R-Salem.
Sen. Edd Houck, D-Spotsylvania County, said Republicans will have to come up with specific cuts if they don't like Kaine's tax proposal.
"They've got to fill in the blanks now," said Houck, a senior member of the Senate Finance Committee. "No more generalities. Tell me where you're going to cut if you don't like this approach. That's incumbent upon the governor-elect and the other side."
Kaine already has presided over $7 billion in budget cuts since 2007 as the state has dealt with the effects of the national recession. The state is projected to collect less general fund tax revenue in the 2011 fiscal year (about $14.4 billion) than it did in 2006. Mandated spending items, including increases in Medicaid rolls, and the expiration of federal stimulus funds in 2011 are key factors in the shortfall in the upcoming biennium.
Kaine's budget would reduce total state funding for public schools by $357 million, though federal stimulus money would offset a portion of that amount.
Kaine again proposed a funding ratio cap for school support staff positions, an idea that generated controversy when he proposed it last year. McDonnell expressed support for Kaine's "direction of more education dollars to the classroom and out of overhead and administrative offices."
The state would use federal stimulus funds to offset cuts to state colleges in the first year of the new budget, but additional cuts in 2012 will leave the colleges with less state funding than they received in 2006. Kaine acknowledged that tuition costs "will likely rise in this biennium."
Kaine's complete budget proposal can be found at dpb.virginia.gov.
