THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, December 19, 1995 TAG: 9512190265
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY MARGARET EDDS AND WARREN FISKE, STAFF WRITERS
DATELINE: RICHMOND LENGTH: Long : 195 lines
A chastened Gov. George F. Allen asked for peace Monday in his two-year battle with Democrats over the direction of state government and proposed a conciliatory $34 billion budget that highlights the Democrats' top priority - education.
Allen, whose bid for Republican control of the legislature was rejected by voters last month, backed away from income and business tax cuts and deep spending reductions that were the centerpieces of his plans last year to ``revolutionize'' state government.
Instead, the governor recommended a $1.05 billion increase to build and operate public schools and universities over the two years starting next July 1. In addition to recommending full funding for quality standards recently approved by the State Board of Education, Allen recommended smaller, more selective cuts than last year in human services.
He continued his commitment to spend more money building prisons and punishing juvenile delinquents. The money includes $17 million for renovations at Southampton Correctional Facility to house violent juvenile felons.
Last year, Allen characterized Democrats as poor financial stewards of the state. This year, he urged them to ``avoid the rancor and division of last year's tax cut debate'' by appointing a bipartisan commission to study tax policies and ways of lowering taxes.
``We absolutely have to work together,'' said Allen, as he presented his budget plans for 1996-98 to money committees of the House and Senate. The people of Virginia ``do not want petty partisanship to get in the way of our responsibilities.''
Democrats, who maintained narrow control of both chambers of the legislature, generally applauded Allen's switch to a less-partisan tone and his recognition that improving education is high on the agenda of Virginians. Last year, Allen sought to cut $90 million from public schools and colleges.
But party leaders also questioned whether the administration was using speculative revenue sources - starting two new lottery games and selling surplus property, for instance - to balance the budget. They also faulted Allen for paying for higher education increases with windfall revenues rather than permanent sources such as taxes.
About two-thirds of the $138 million in new operating funds for higher education comes from a settlement with Trigon Blue Cross Blue Shield, which is seeking state approval to become a for-profit company.
The budget ``relies to a troubling degree on one-time resources,'' said outgoing Senate Finance Chairman Hunter B. Andrews, who was defeated in November. In a farewell speech that followed Allen's, the 32-year veteran praised Allen for abandoning his partisan rhetoric. ``This proposed budget is a far cry from the polarizing and ideological litmus test'' that Allen presented last year, he said.
But Andrews also complained that the budget for prisons is increasing at a faster rate than money for colleges. ``Much of the progress we have made in the last 15 years is eroding,'' he said.
At least two major areas of disagreement between Allen and Democrats may emerge when the Assembly convenes on Jan. 10, interviews suggest.
First, Democrats may try to find more money for public schools and universities. Democrats committed last fall to spending $32 million to lower class sizes for kindergarten to third grade, but Allen included only $3.1 million for the effort.
Second, there may be disagreements over the disbursement of lottery profits.
In the budget, Allen stood by his campaign pledge last fall to return more than $300 million in annual lottery profits to localities. He recommended starting next year by refunding $15 million to municipalities for public education, and phasing in the rest later.
Republican lawmakers are expected to introduce bills to extend the phase-in over the next five years.
Democrats have questioned the wisdom of giving up that revenue source during tight budgetary times, noting that about half of all the money the state collects is already earmarked for localities.
Allen's spending increases would be paid for in part by $59 million that he estimates the state would take in over two years from two new lottery games, Powerball and Keno.
Powerball is better-known as a national lottery in which 21 states now participate. Although the jackpots at times are in excess of $100 million, the odds of winning are 1 in 55 million, or eight times the odds in the Virginia Lottery.
Keno is a fixed-jackpot game now found in eight states where players try to choose lucky combinations from about 80 numbers.
Several lawmakers also questioned whether Allen had made adequate preparations for the outcome of federal budget negotiations going on in Washington. Andrews and several others said there will almost certainly be less money coming into Virginia as Congress shifts an increasing burden for social welfare programs on state governments.
Democrats also voiced concern that Allen projected in his budget only a 3.5 percent or less increase in Medicaid costs - several times less than the average increase over the past decade.
Secretary of Finance Paul W. Timmreck replied that there is at least as much reason to believe Virginia will come out ahead in the federal budget negotiations, based on recent state reforms in Medicaid and Aid to Families with Dependent Children.
``We didn't think it would be prudent to base the budget on what Congress might do,'' Timmreck said.
Allen's budget calls for cuts in several human services agencies, including the state Health Department and the Department of Mental Health, Mental Retardation and Substance Abuse Services.
But the reductions are much smaller than those recommended last year, and in some cases reflect shifts of responsibilities to other agencies where funding is increased.
``Given the history of the last few years, these are maintenance numbers,'' said former Secretary of Health and Human Resources Howard C. Cullum, who served under Allen's Democratic predecessor. ``He's basically going to hold the line on human services.''
In his speech to lawmakers, Allen made no mention of his plans for areas such as human services, transportation or commerce and national resources. Instead he focused entirely on what he said were his three top priorities: education, economic development and law enforcement.
Allen proposed $21.7 million in new spending for business recruitment and outlined a plan to consolidate various economic development agencies and programs under one department.
The budget included $83.9 million in additional operating money for new prisons and $16.2 million over two years to help build local jails.
In line with his proposed toughening of state juvenile crime laws, Allen included money to build three boot camps and a wilderness work camp. The governor also recommended requiring the parents of juvenile offenders to pay part of the cost of their incarceration. Payments would be determined by a formula based on their personal wealth.
Allen provided for a three percent cost-of-living raise for state employees in December 1997. In addition, an adjustment in payroll procedures will result in a one-time bonus to state employees of two week's pay.
But several legislators claimed that one week of the bonus won't actually be received by workers until they leave the employ of state government.
``If you look at it on a cash basis, you're exactly right,'' said Bob Lauterberg, director of the state office of budget and planning. ``But if you look at it on an actuarial basis. . . '' His voice was drowned out by the laughter of lawmakers.
The budget relies on revenue forecasts that have grown rosier in recent weeks. The administration said it revised its revenues upward after meeting with business executives who said they intended to pay larger increases in wages and salaries over the next two years then state analysts had expected.
Allen saved $27.2 million by declining to implement a repeal of the state sales tax on non-prescription drugs. ILLUSTRATION: Color photo
Graphic
THEN AND NOW
Allen's Proposals
THEN
``I have made the necessary hard choices. Next month will be time
for you to choose: the status quo or an exciting new era of freedom,
opportunity and responsibility for Virginians.''
(Said Dec. 19, 1994, in presenting his budget amendments for
1995-96).
NOW
``My goal today is a productive dialogue and cooperation. . . .
Of course, I shall continue in good conscience to work for my
Jeffersonian principles in which I believe. ... We absolutely have
to work together.''
(Said Dec. 18, in presenting his budget for 1996-98).
THEN
Slash virtually every state program, eliminate $149 in revenue
for the fiscal year, return that money to individual income
taxpayers and businesses
NOW
Mince rather than chop, make more careful and selective cuts and
move money to where it matters most to citizens--in the arena of
education
THEN
Phase out the BPOL tax because it's bad for business.
NOW
Study the tax
THEN
Cut income taxes
NOW
Study income taxes
THEN
Cut $90 million from education funding
NOW
Increase K-12 funds by $573 million and higher education by $475
million
THEN
Return $15 million of lottery profits to localities
NOW
Return $15 million in lottery profits to localities
THEN
Big cuts to social services
NOW
Modest cuts or stable funding to social services
THEN
Raise corrections money by $92 million and borrow upwards of $175
million more to build new prisons
NOW
Focus on reforming the juvenile justice system by investing $19
million to create new programs and $17 million in capital
improvements
KEYWORDS: VIRGINIA STATE BUDGET by CNB