Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, December 21, 1993 TAG: 9312210116
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: BONNIE V. WINSTON STAFF WRITER
DATELINE: RICHMOND LENGTH: Long
Gov. Douglas Wilder, preparing to leave office and gearing up to run for the U.S. Senate, proposed tax cuts Monday totaling $142 million.
But Wilder critics in the General Assembly, led by House Majority Leader Richard Cranwell, D-Roanoke County, said Wilder's $32 billion state spending plan for 1994-96 would play politics with state finances and further imperil public schools and colleges.
After a briefing by administration officials on the spending plan, Cranwell suggested they "were cooking the numbers for political purposes" when they projected a $500 million revenue shortfall last summer, allowing Wilder to publicly allocate money now "to do some things that have political overtones."
In particular, Cranwell pointed to Wilder's proposal to give raises to state employees, repeal the state sales tax on nonprescription drugs and give tax breaks to self-employed Virginians.
"It looks to me like a pretty good foundation for a Senate race," he said.
The largest break in Wilder's package would be for self-employed Virginians, who could claim a state tax deduction for a portion of their federal Social Security and Medicare taxes.
And because the change would make Virginia's laws conform with federal tax changes that took effect in 1990, the self-employed could claim deductions retroactive to 1990 during the next four years.
Several lawmakers called the proposal pure politics, and federal retirees in the fifth year of a tax fight with the state charged that it's one more example of misplaced priorities. The U.S. Supreme Court ruled in 1989 that Virginia had improperly taxed federal pensioners.
"It seems to me that several times they've gotten their priorities out of line," said Oscar J. Honeycutt, former president of the Virginia Federation of the National Association of Retired Federal Employees. He urged Gov.-elect George Allen to introduce budget amendments to provide refunds for the pensioners.
Allen, a Republican, said during the gubernatorial campaign that he supports a settlement of the pensioners' claims. But Honeycutt said Monday the pensioners haven't been able to get a foot in the door with Allen since Election Day.
"This matter is obviously in litigation. I don't care to negotiate in public," Allen told reporters Monday.
He said he intends to craft a settlement to be paid to the retirees over several years. "We'll be looking at it in the weeks or months to come," he said.
Wilder, a Democrat, told reporters that he included no money in the budget for retirees' refunds because settlement negotiations broke down.
"Rather than putting the cart before the horse, we're going to wait to see what the court says," Wilder said.
The case now rests with an Alexandria Circuit Court judge who is determining whether and how much of a refund the federal pensioners should receive.
Del. Jay DeBoer, D-Petersburg, who sits on a House subcommittee devising a process to pay refunds should the courts require it, said Wilder's proposed tax break for the self-employed "does appear to be pandering to a group that appears to be doing fairly well."
Wilder's proposed two-year, $32 billion budget, which would take effect July 1, includes $3.5 billion more in spending than the current budget.
In addition to the tax breaks, the package includes no new taxes; annual 2.25 percent raises, plus additional bonuses of up to 4 percent, for state workers, public school teachers and state college faculty; $172 million in additional spending for local schools; and $217 million to boost Medicaid health insurance for the poor.
But the package also calls for layoffs of more than 740 state employees, $72.9 million in cuts to higher education; tuition and fee increases totaling $58.5 million at state colleges and universities; eliminating 227 beds at mental hospitals across the state; slashing Virginia Tech's extension service; and temporarily closing Mecklenburg Correctional Center and relocating its 340 maximum-security inmates and 310 employees.
Wilder, who recently championed the cause of state employees when he, by executive fiat, ordered several hundred to ignore Allen's demand for their resignations, insisted he was not "playing Santa Claus" with what is to become Allen's budget.
"I said back in the summer that we had tight times, and we would have to continue to streamline," Wilder said. He called the cuts "less Draconian" than some in the past and insisted they "had to be made."
Several lawmakers speculated that Allen can expect only to make "cosmetic" changes to the spending plan, which includes $14.6 billion in general fund revenues, most of it from state income and sales taxes.
Several Republicans noted that Allen, who campaigned on a no-parole policy for criminals, likely will reject the proposal to close Mecklenburg. And he promised during the campaign to limit annual tuition increases at state colleges to the inflation rate.
Several lawmakers pointed out Monday that Wilder's budget includes a 5 percent increase in in-state tuition for 1994-95, followed by a 4 percent increase in 1995-96. Both are higher than the inflation rate.
"It's a smoke-and-mirrors game again," said Del. Vince Callahan, R-McLean. "There are reductions in one part, increases in another, and it all comes out a wash.
"The bottom line is that we're going to spend $1.2 billion more over the next biennium, so it's not a reduced budget," Callahan said.
According to figures released Monday, the predicted $500 million shortfall of last summer is $350 million and will be made up by $205.9 million in cuts to agencies and programs and $159.5 million in heightened tax collections during 1994-96.
by CNB