Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, December 2, 1994 TAG: 9412020076
SECTION: VIRGINIA PAGE: A1 EDITION: METRO
SOURCE: MARGARET EDDS AND DAVID M. POOLE STAFF WRITERS
DATELINE: RICHMOND LENGTH: Long
"You all are as bad as my kids," Allen scolded reporters who pressed for details. "They can't wait to open up all the presents."
The first-year Republican governor proposed slashing state income taxes by $1.3 billion over five years by tripling the personal exemption for each family member. The plan eventually would save most families about $250 to $350 a year and would remove 84,000 low-income Virginians from the tax roles altogether, he said.
Allen also called on localities to phase out what he called a "despised" tax on business receipts that generates $300 million a year for local governments.
But other than proposing cuts in the state's 110,000-person work force, Allen offered few clues about how to close the revenue gap. And administration officials acknowledged that much of the bill won't come due until after Allen leaves office in early 1998.
The proposal comes as Republican governors nationwide are earning plaudits by pushing for tax relief. It also puts the General Assembly's Democratic leadership on the defensive as it seeks to retain its fragile grip on power in next year's elections.
Leading Democrats seemed loath to criticize something as popular as a tax cut. But they called on Allen to prove that his idea wouldn't cripple services after four years in which many agencies already have faced substantial cutbacks.
"Everybody wants lower taxes and leaner government," said House Speaker Thomas Moss, D-Norfolk. "But the question, again, is: How is he going to pay for it? And he still isn't giving any answers.
"We cut the budget $2 billion under the last governor. People have got to decide what they want to go without - schools, roads, colleges."
At a news conference packed with Allen administration officials and business leaders, the governor said the issue isn't reduced services, but more efficiency.
Allen said he would make a down payment on the tax cuts by slashing the state's work force. He imposed an immediate hiring freeze and offered a severance package - one week's pay for every year of service - to encourage an unspecified number of state employees to quit.
If enough workers don't leave voluntarily, Allen threatened to begin a new round of layoffs next year.
In a letter to state employees dated Thursday, the governor said a "significant reduction in the work force is inescapable." But at his news conference he refused to spell out how much he expects personnel savings to offset the $2.1 billion in tax cuts.
Allen also refused to lay out other cost-saving ideas, but promised to do so at a Dec.19 briefing.
Some hints are contained in an Allen task force report, issued earlier this fall. It recommended saving money by selling off some state property, eliminating 16,000 state jobs, cutting out some government functions, and turning others over the private companies.
Finance Secretary Paul Timmreck acknowledged that what Allen will outline later this month are his ideas for paying for the first year of the proposal, which will cost $149 million.
At the same time, Allen will have to come up with an added $350 million to cover an anticipated shortfall caused by a settlement with federal pensioners and increased prison expenses related to parole reform.
Senate Finance Chairman Hunter Andrews, D-Hampton, noted that state spending has been cut by 30 percent since mid-1990, and that it would be difficult to cull another $500 million from the budget.
"You're narrowing down what you can cut," he said at an annual Finance Committee meeting at Virginia Tech in Blacksburg.
Andrews, who has the power to cripple Allen's plan when the General Assembly convenes in six weeks, withheld comment until the Dec. 19 briefing.
Allen hinted that he would hold Democrats accountable in next year's legislative elections, in which the GOP has a chance to seize control of the General Assembly for the first time in modern history.
"This will be a defining moment for members of the General Assembly," he said.
Lt. Gov. Don Beyer, the Democrats' highest-ranking elected official, acknowledged that Democratic lawmakers will find it difficult to cross Allen.
"As long as he also has a responsible plan to pay for them, I think it will sail through the General Assembly with bipartisan support, including mine," Beyer said.
Allen said his plan to triple the personal exemption from $800 to $2,400 will mean "more jobs, good jobs, and job security for Virginians. It's high time we direct our hard-earned resources away from government and back into the private economy."
Reporters questioned whether the savings - less than $100 for most families in the first year - will have as dramatic an impact as Allen suggested.
"If you saw $100 laying on the ground, I think you'd pick it up. I would. Shoot, I picked up four sticks of gum walking over here," he said.
Democrats said they were concerned that Virginia may be following the lead of New Jersey, where income tax cuts resulted in higher local property tax rates.
Allen said he will lessen the incentive to boost local property taxes by giving localities state funds equal to the amount of lost business-tax revenue for five years.
State Chamber of Commerce officials praised the notion of doing away with local taxes on business receipts. But local government officials were skeptical.
Roanoke Mayor David Bowers said citizens would find it "uproariously unacceptable" to replace the business tax with property taxes.
Allen said income tax relief is long overdue. "Virginia's income tax burden ranks in the top third of the states'," he said.
But a study for the National Conference of State Legislatures shows that Virginia's overall tax burden is one of the lowest in the nation - and falling.
From 1990 to 1992 - as Virginia held the line on taxes - the state's ranking for local and state tax revenue per $100 of personal income fell from 44th to 47th in the nation.
Staff writer Brian Kelley contributed to this story.
by CNB