Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 26, 1995 TAG: 9502270076
SECTION: VIRGINIA PAGE: A1 EDITION: METRO
SOURCE: WARREN FISKE STAFF WRITER
DATELINE: RICHMOND LENGTH: Long
It was Feb. 2 and Allen invited his chief foe in the legislature - House Majority Leader Richard Cranwell, D-Roanoke County - to the Executive Mansion for breakfast with a few other lawmakers. For months, Cranwell and Allen had been exchanging barbs through the media. Only in recent days had the Republican governor begun to concede that Cranwell had accomplished the impossible: He had persuaded Democratic lawmakers to reject a tax cut during an election year.
Over coffee and eggs, Allen said he would be willing to scale back his plans for a $2.1 billion tax cut over five years and strike a compromise with Democrats.
"How much tax cut will you agree to?" Allen asked.
Cranwell turned the question back to Allen. He complained that the governor had ignored repeated requests for a long-range list of state programs he would cut to pay for the tax reductions or to provide assurances that education would not be harmed.
"Governor, I can't answer your question `how much' until you answer my question `how,'" Cranwell replied.
Hours later, the money committees in both legislative houses summarily killed the first-year installment of Allen's plan.
The setback hardly signals the end of Allen's crusade to cut government and taxes. In the months leading to this fall's elections, the 42-year-old governor is expected to travel the state and accuse Democratic lawmakers of being big government advocates who obstructed his plans to return money to taxpayers.
With the GOP needing to gain only three seats each in the 100-member House and the 40-member Senate to seize control, the rhetoric will play a dramatic role in determining the future course of state government and Allen's ultimate success as governor.
But a number of Democrats, Republicans and prominent state business leaders say Allen has only himself to blame for this year's colossal failure. They say Allen, Virginia's youngest governor in more than half a century, made a series of grave miscalculations that doomed his plan from the start.
Allen was rebuked on a number of major proposals this year, including education reform, prison building, and an attempt to phase out local taxes on business receipts. In addition, he spent much time haggling with lawmakers over revamping the welfare system. Many Republicans who strongly backed Allen acknowledge that the governor may have over-extended himself.
None of the setbacks was as crucial to Allen's basic ideology of limited government as the rejection of the tax decrease.
What appeared as a can't-lose proposition for Republicans last fall ended with some bad political fallout: Democrats, in search of a message to reverse a steady erosion of their power, wound up unified and revitalized. And Allen, once the darling of Main Street business interests, may have alienated a formidable group of power brokers.
The genesis of Allen's plan is something of a mystery. Many who opposed it suspect Allen was inspired by last November's national elections, when Republicans won control of Congress for the first time in 40 years with a pledge to cut spending and taxes.
Allen says his proposals were part of a "mandate" voters gave him in 1993 when he was overwhelmingly elected governor. Allen never proposed cutting taxes during his campaign. But that goal, he says today, was an implicit part of his campaign pledge to cut wasteful spending.
Allen says detailed planning for his budget proposals was well under way last summer. The work, however, was kept a strict secret because of fears that unrefined plans might be leaked to the public and galvanize resistance.
Allen started putting out the word on Nov. 30, when he made a number of conference calls to tell Republican lawmakers that he would soon be proposing a five-year plan to cut state income taxes by $2.1 billion. "There wasn't a lot of opportunity to ask questions," Del. Vince Callahan, R-McLean, recalled. "The governor was already committed to the plan."
"Perhaps things would have worked out better if he had consulted with a few of us gray-haired eminences," said Del. Andy Guest, R-Front Royal.
The first signs of trouble emerged that very day. Sources say Allen received a chilly reception during a luncheon at the Executive Mansion when he unveiled his plan to two icons of Virginia's fiscally conservative heritage: former Gov. Mills Godwin and former U.S. Sen. Harry Byrd Jr. Godwin - who later would become instrumental in the defeat of Allen's proposal - and Byrd have declined to comment on the meeting.
Two days later, Allen publicly announced his intention to cut taxes, saying he would release details later in December. Democratic leaders, whose cooperation would be essential to Allen's success, truly were caught by surprise. Cranwell was sitting in his law office when he heard the news on the radio. Senate Majority Leader Hunter Andrews of Hampton was informed by a reporter.
Allen seemed to delight in their distress. When Andrews requested a conference to discuss the budget, the governor's office sent him a form letter asking him to state an official reason for seeking a meeting. Andrews angrily declined.
The tactics created a tense partisan atmosphere when Allen met with the General Assembly money committees on Dec. 19 to outline his plans for the first year's cut. The governor wanted to save $150 million by slicing education funding, 1,100 state jobs, police protection and a number of popular social programs such as "Meals on Wheels" for senior citizens.
In return, a family of four with an adjusted federal gross income of $40,000 would have saved $33 a year.
Andrews noted that Allen was proposing $150 million in tax cuts at a time he was seeking to increase state debt by an almost equal amount to finance prison construction; the senator accused the governor of borrowing money to pay for tax relief.
"It's the kind of budgeting that made Washington famous, or infamous," Andrews declared. "I do not intend to be a party to it in Virginia."
Despite Andrews' denunciation, Democrats were clearly in a quandary. Many rejected Allen's assertion that Virginia government is wasteful. After all, the commonwealth had been cited two times in the past three years as the best managed state in the nation by Financial World Magazine. It was one of only five states with a perfect AAA credit rating. And its state and local tax burden - $192 for every $1,000 of income - was the fifth-lowest in the nation.
Moreover, Virginia was one of only two states that did not raise tax rates during the recent recession. Instead, spending was cut by almost $2 billion. Democrats argued that further cuts would deplete essential services.
That concern, however, ran up against the cold political reality of this fall's legislative races. Allen was pledging to campaign against any Democrat who opposed his plan. Would voters have sympathy for any explanation of why a tax cut was not in their interest?
Democrats received encouraging signs in early January when special interest groups flocked to public hearings across the state to protest Allen's proposed program cuts. Only a handful of citizens spoke on behalf of tax reduction. In addition, many Democrats said their constituent mail was running more than 50-to-1 against Allen's proposals.
But the Democrats were hardly emboldened on Jan. 11, when the General Assembly convened for its 1995 session. Shouts burst out during a closed-door caucus of House Democrats. Speaker Thomas Moss of Norfolk urged compromise with Allen, arguing that rejection of a tax cut could be suicidal. Others, including Cranwell, Del. Clifton "Chip" Woodrum of Roanoke and members of the black caucus, urged defeat of the plan.
"Is it worth sacrificing principles to save our seats?" Cranwell implored.
In the normally staid Senate, tensions boiled over. Democrats and Republicans locked horns on a routine resolution that would establish legislative deadlines and allow the House and Senate to hold a joint meeting that night to hear Allen's State of the Commonwealth speech. As a result, Allen had to deliver the televised address from his office.
Momentum to defeat Allen's plan grew slowly. Democrats received encouragement on Jan. 20, when many newspapers ran a poll showing that state voters were split on the tax cut and strongly opposed to many of Allen's proposed spending reductions.
The decisive blows to Allen, however, did not come from constituent letters, polls or backroom meetings in the Capitol. Instead, the knockout came from corporate boardrooms, where a group of the state's most influential businessmen united against the governor.
Calling itself the Virginia Business-Higher Education Council, the group formed in late 1993 out of concern that Virginia colleges were slowly being gutted by budget cuts. During the recession, the legislature had sliced $400 million from higher education to balance the state budget. As a result, tuitions in Virginia climbed to the second-highest in the nation.
The businessmen feared that soaring costs would make college education inaccessible. They had been hoping, as the state's economy began to improve, that money would be restored to universities. When Allen proposed an additional $47 million cut to higher education, the group jumped into action.
Although the group lists two dozen members, three men in particular led its assault: John Hazel, a McLean developer and former rector of George Mason University; Joshua Darden, a Norfolk businessman and former rector of the University of Virginia; and Hays Watkins of Richmond, the retired chief executive of the railroad conglomerate CSX Corp. and former rector of the College of William and Mary.
The group's opposition was a blow to Republicans. About two-thirds of the group's members had contributed substantial sums to Allen's 1993 gubernatorial campaign. Now, many of the same people were standing up at budget hearings and all but accusing the governor of inventing a financial crisis to further his political ambitions. In private, the group was promising help for friendly legislators who encountered election-year problems because they opposed the tax cut.
The coup, however, was achieved by Hazel. Working behind the scenes, he persuaded three former governors - Republicans Godwin and Linwood Holton and Democrat Gerald Baliles - to sign a letter deploring the cuts to higher education. The release of the letter on Feb. 1 provided the final measure of protection to Democrats worried about bucking the governor.
The next day brought the "Thursday Massacre."
Allen, who wanted to record every legislator's vote on the tax cuts, has expressed outrage that Democrats used their majorities to kill the bills in committees. And in the closing weeks of the General Assembly session, many of Allen's supporters have bitterly complained that the opposition was carefully choreographed by a political consultant - a charge Democrats strenuously deny.
"All we were trying to do is reduce state spending by 3 percent to put money back in the pockets of taxpayers," state Sen. Kenneth Stolle, R-Virginia Beach, said. "Democrats were simply unwilling to discuss the matter."
But several senior Republicans who broke with the governor place the blame squarely on Allen. "The mantra of `let's cut taxes' rang hollow in Virginia," said Del. Clinton Miller, R-Shenandoah, who opposed Allen for the 1993 GOP gubernatorial nomination. "Everyone knows Virginia is a low-tax state. If the governor had cared to consult with people who understood some of the progress we've made in this state, perhaps this whole episode could have been avoided."
Democrats say Allen failed to make a case for his tax cuts and, when pressed to debate their merits, always resorted to political rhetoric. He accused Democratic leaders of being "fat cat, career politicians," and "defenders of the status quo."
In the end, Democrats said Allen boxed them in a difficult corner. "There was a feeling that no matter what we did, the governor was going to criticize us in elections," said Del. Glenn Croshaw, D-Virginia Beach, who originally urged his colleagues to compromise with the governor. "There comes a point when you have no choice but to fight back."
Allen, for his part, acknowledged last week that perhaps he overreached with his tax cut proposals. "I've learned something through this experience," he said in a radio interview. "The budget cuts were portrayed as too much ... maybe they were too much."
But Allen vowed to be back next year, possibly with a scaled-back plan. "This fight is not over," he said. "I'm not going away."
Keywords:
GENERAL ASSEMBLY 1995
by CNB