Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 22, 1995 TAG: 9501240034
SECTION: EDITORIAL PAGE: D-2 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
Not from Republican Gov. George Allen, so eager to boast of producing a tax cut that he's ready to trade in Virginia's reputation for fiscal integrity. And not from some Democratic lawmakers, so fearful of opposing Allen's plan on its demerits that they're turning to debt demagoguery instead.
Contrary to the Democrats' increasingly voiced lament, what's wrong with the governor's package is not that he proposes to borrow $400 million (with more probably to come) for prison construction while cutting taxes by $2.1 billion over the next five years.
On this point, Allen is right. Borrowing for long-term capital outlays like prison construction is appropriate and traditional. Several of the Democrats now critical of borrowing for prison construction have supported it in the past. Their expedient conversion to a pay-as-you-go fiscal philosophy ignores the state's top-notch credit rating, which suggests the amount to be borrowed is well within Virginia's current means.
The governor is probably right, as well, in arguing that the revenue forgone from his proposed tax cut would be offset - in the 1995-96 budget - by the $403 million he proposes to cut in spending. If they block the tax cut, the Democrats would make it possible to maintain 1995-96 spending at previously budgeted levels. Or they would make it possible to build prisons without borrowing. But blocking the tax cut would not allow both.
The governor's critics should abandon bogus arguments and home in on the things that are wrong with his proposals. They aren't that hard to find.
Given the commonwealth's low rank in state and local tax burden - 46th in 1992, down from 38th just four years earlier - it is perhaps no surprise that Allen's proposed cuts for next year strike many Virginians as needlessly reckless surgery on healthy, vital tissue.
But what most Virginians don't know, and what Allen isn't telling them, could prove still worse: the plan's fiscally dangerous impact on later years, when another governor will be around to suffer the consequences along with the rest of the state.
Allen's financial projections for the 1996-98 biennium, for example, don't even try to take into account the likely impact on the state budget (less revenue, more expenses) of tax and spending changes in the offing at the federal level.
Even putting these impacts aside, conservative General Assembly estimates (assuming no change in federal policy and, for that matter, no salary increases for state employees or teachers) show a $700 million revenue shortfall in 1996-98 if Allen's tax-cut plan goes into effect. The governor isn't saying what further budget cuts, or tax increases, will be needed to close that gap.
Nor is he specifying how, in the long run, localities are to make up for his proposed elimination of the business receipts tax. (Hint: Watch your property taxes.) Allen isn't telling the whole story, either, on his proposal to triple the personal exemptions in the state income tax. They could be tripled in a revenue-neutral way, by offsetting the tax relief for working-class families with a slight rate increase at the top of the scale.
And this is not to mention long-term costs of such short-term savings as slashing funding for dropout-prevention programs and community-action anti-poverty efforts.
Bond issues aren't the problem. Lawmakers should concentrate on the real flaws in Allen's plan and, instead of matching the governor's lack of fiscal candor, strive to correct it.
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GENERAL ASSEMBLY 1995
by CNB