Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, October 2, 1995 TAG: 9510020068
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: WARREN FISKE AND DWAYNE YANCEY STAFF WRITERS NOTE: Below
DATELINE: LENGTH: Long
Last month, the four Republican candidates for the General Assembly in the Roanoke Valley gathered, a blue felt-tip pen in hand, and inked their signatures to a "taxpayer protection pledge."
Each then took a turn talking about why, if they're in Richmond next year, they'll vote against "any and all efforts to increase taxes."
To hear the Republicans talk, Virginians suffer under an onerous tax burden. House of Delegates challenger Newell Falkinburg charged that Virginia has a state government "addicted to a tax-and-spend mentality."
That doesn't quite square with the way Virginians see themselves. In a poll by Virginia Commonwealth University this summer, most Virginians said that while federal income taxes and local property taxes are too high, they believe the state's income tax - which constitutes the bulk of state revenues - is "about right."
Nor does it square with the way Virginia Democrats interpret the facts.
Scarcely a speech goes by that House Majority Leader Richard Cranwell of Roanoke County doesn't make the case that Virginia is a low-tax and low-spend state - a condition he credits to a frugal Democratic General Assembly. It's a point he and other Democratic candidates recite like a mantra: "There are only four other states that you can live in that take a smaller bite, listen to me, a smaller bite, out of your paycheck than the Commonwealth of Virginia. ... There's only one other state that spends less than we do, and that's the state of Missouri...''
Campaigns are about disagreements, so it's natural for Republicans and Democrats to disagree about what the state's policies should be. But the two parties don't even agree on how to describe the basic state of Virginia's financial condition.
Both sides do agree on one thing, however: Taxes and spending are central to this fall's General Assembly campaigns. Voters are being offered two clear policy choices:
Democrats promise to hold the line on taxes and expand funding for public education and higher education - which they say they can do without a tax increase because, in a growing economy, the state's tax collections are rising.
Republicans promise to reduce taxes and services to put more money in residents' pockets.
The outcome of this debate could affect the direction of state government for years. Democrats have controlled the legislature for more than a century and have been in the position to make most of the state's spending decisions. If Republicans pick up three seats in the House and three in the Senate, they'll seize majorities for the first time.
Whichever party wins will call the shots next winter when the General Assembly works on the next two-year state spending plan. With the federal government increasingly turning control of social programs over to the states, Virginia's elected officials will have more power than ever to affect the daily lives of their constituents.
Virginians, though, may have difficulty figuring out just what those effects might be:
Candidates are not always eager to discuss the true costs of their proposals. Democrats and Republicans alike say the state can painlessly pay for their spending increases - or their tax cuts - merely by watching the state's tax base grow.
Democrats want to put computers in every classroom, hire more teachers to cut class sizes and increase state funding to financially pressed rural school districts. Says Democratic House challenger Claude Whitehead of Pittsylvania County, "All of this can be paid for through normal revenue growth, which is currently in the range of $750 million per year."
But there's no mention of what happens if there's a recession and the state's tax revenues don't grow "normally" - or take a dip.
Lt. Gov. Don Beyer, a Democrat, is one of the few figures to suggest that neither party can initiate major programs without seeking some sacrifice by residents. "The easy things have been done a long time ago," he says.
Nor are candidates likely to volunteer information about the trade-offs that any changes in taxes and spending involve. At last month's GOP event, Falkinburg took aim at the Democratic incumbent he's trying to oust, calling attention to tax increases that Del. Clifton "Chip" Woodrum has voted for during the past decade.
However, Falkinburg did not mention that the three most prominent tax increases on his list were part of Gov. Gerald Baliles' 1986 transportation program - an initiative backed by many Republicans and whose proceeds helped pay for, among other things, Roanoke's airport terminal.
Both sides like to cite statistics to make their case - the Republicans, that Virginia is a high-tax state; the Democrats, that Virginia is a low-tax one. And both sides, to some extent, are correct. It's not a matter of which figures you want to believe; both sets are accurate. It's more a matter of personal priorities, and which figures you think are more relevant to your life.
Here's a closer look:
BACKGROUND
Where Virginia Stands
Virginia prides itself as an extremely frugal state. The legacy is traced to the late 1920s, when former Gov. Harry Byrd Sr., a Democrat, demanded "pay as you go" budgeting principles. An early opponent of big government, Byrd believed in low taxes and limited spending and abhorred borrowing money to pay for programs. He founded a political machine that dominated state government until the mid-'60s; his conservative fiscal approach remains a cornerstone of Virginia's political heritage.
State government has become considerably more complicated since the Byrd days. But, by most measures, Virginia remains a low-tax state that provides services far below its residents' ability to pay. Consider these figures provided by state agencies and a variety of independent statistical services:
Although Virginia's per capita income of $22,052 ranks 15th highest among states, its tax burden ranks 49th. Of every $1,000 earned, state and local governments claim $194 in taxes. Only New Hampshire ranks lower.
Virginia and Massachusetts were the only states that did not increase tax rates during the recession earlier this decade.
Virginia is one of five states with a top-notch AAA bond rating, which allows it to borrow money for construction projects at low interest rates.
Twice in the past four years, Virginia has been cited as fiscally the best-run state in the nation by Financial World Magazine. This year, the state ranked second behind Utah.
The trade-off for low taxes in the Old Dominion is that residents are provided lower service levels than in other states. For instance, Virginia ranks 49th in the country in funding arts. Consistent with its low tax ranking, Virginia also ranks 49th in state spending per $1,000 of wages.
Lawmakers have generally believed that Virginians prefer low taxes to expanded programs. The results of that policy are felt widely. One way the state was able to avoid a tax increase during the recent recession was to cut $450 million from colleges and universities. Over five years, Virginia slipped from 28th to 43rd in tax support per college student. As a result, average tuitions at state colleges - $3,841 a year - are the second highest in the nation.
RHETORIC AND REALITY
Values and Facts Underlying Debate
At its core, the discussion about taxing and spending is about ideology and the future direction of Virginia.
Allen and his GOP allies argue that Virginians want less government, fewer services and lower taxes. They maintain that the best stimulus for economic growth is keeping money in the pockets of the people who earn it.
Democrats say taxes are already low and services lean. They say further reductions will be catastrophic to education and social services. Democrats aren't calling for a tax increase. They believe growth in Virginia's economy should provide additional tax revenues to put more money in public schools.
Allen and many Republicans argue that more money won't buy better schools. They're calling for rigorous academic standards, a back-to-basics curriculum and discipline.
They also insist that big savings can be found in a government that spends $16.1 billion a year.
Both parties back their claims by citing a variety of statistics. Some of them are misleading, or don't present the full picture:
``Since Chip Woodrum was first elected in 1979, state spending has increased 300 percent.''
- Newell Falkinburg, Republican challenger to Del. Clifton "Chip" Woodrum, D-Roanoke.
This is a popular statistic among Republicans. The state budget has almost tripled in 15 years, from $5.7 billion in 1980 to an estimated $16.1 billion this year.
However, the amount of the increase - $10.4 billion - is only 182 percent of the budgetary starting point of 1980 that both parties use for debating purposes. And then there's inflation. When adjusted for inflation, that increase in state spending since 1980 is only 57 percent.
Also, the state's population grew by 25 percent during the period, driving up tax collections and demand for services.
Mandates from the federal government hit hard. Virginia's share of paying for Medicaid - medical services for the poor - jumped from $164 million in 1980 to $1.1 billion this year. No other single expense in the state budget has grown as fast.
All told, 80 percent of the 15-year increase in spending has gone to five services: Medicaid, public education, colleges and universities, prisons, and mental health programs.
``In the last 15 years, state spending has increased over 300 percent. Faster than the Democrats in Congress could spend it...''
- Trixie Averill, Republican challenger to Del. Richard Cranwell, D-Roanoke County.
As noted above, state spending hasn't increased "over 300 percent." But let's not quibble. The essential point is that Virginia Republicans like to charge that the growth in state spending has outstripped even that of the federal government.
This is true. Federal spending has increased by 160 percent - from $591 billion in 1980 to an estimated $1.5 trillion this year.
But Virginia isn't unique. Spending for all states grew by 172 percent between 1980 and 1992, according to data published by the Council of State Governments. Virginia's spending during that 12-year period increased by 127 percent.
``My opponent and the governor have put their narrow devotion to ideology ahead of our children's future. Rather than supporting education programs to improve our schools, my opponent offers nothing but 'Alice in Wonderland' ideologically driven programs such as charter schools, which would undermine our public schools.''
- John Edwards, Democratic challenger to state Sen. Brandon Bell, R-Roanoke County.
Many Democrats argue that they are friendlier to education than Republicans.
It's true that Democratic legislators defeated Allen's proposals to cut school funding last winter. But Democrats, who control the General Assembly, have not been overly generous to education in recent years. Since 1990, increases in public school funding basically have been held to inflation. And former Gov. Douglas Wilder, a Democrat, is responsible for the deep cuts colleges and universities suffered earlier this decade.
``Contrary to claims that Virginia is a low tax state, the Commonwealth's total per-capita tax burden in 1992 was the highest in the Southeast. Today, Virginia is among the third of the states with the highest per-capita individual income-tax burden in the country.''
- Trixie Averill, Republican challenger to Del. Richard Cranwell, D-Roanoke County.
When Democrats talk about Virginia being a low-tax state, Republicans like to focus on how much in taxes the state levies per capita. Specifically, they point out Virginians pay the 16th-highest amount of state income tax per capita in the nation.
This is true. Virginia relies heavily on the income tax, collecting 56 percent of its general revenues from the levy. The trade-off is that Virginians pay among the lowest sales, corporate and tobacco taxes in the nation.
PLANS AND TRADE-OFFS
Party Platforms Offer Options
All of the Democrats' budget proposals this fall center on improving education. They want to appropriate $266 million over the next two years to put a computer in every public school classroom and reduce kindergarten through third-grade class sizes.
Democrats say they can pay for that initiative through revenue they anticipate from economic growth in Virginia. They are not seeking a tax increase or proposing cuts to other state programs.
Republicans are offering a sweeping, complex plan for change. Most Republican candidates signed a pledge that commits them to three spending principles: returning lottery profits to local government, "eliminating wasteful spending," and "reducing excessive taxes."
The lottery's $318 million annual profit now goes into the state's general fund. Republicans argue that voters were promised the profits would be earmarked for schools and local construction projects when the lottery was approved in 1987. They are proposing phasing in a five-year program to give the money to local governments for use in public schools, law enforcement or property-tax relief.
But localities may not be in for a windfall if other elements of the GOP plan succeed. Although Republicans are not defining the "excessive taxes" they plan to chop, tops on the hit list appears to be the Business Professional Occupation License Tax - BPOL. State law allows localities to put a levy on gross business receipts. It brings in $300 million a year to municipal coffers, although not all localities levy the tax.
A Republican effort to abolish the tax was defeated last winter. Allen - who believes the tax stymies business growth - has said he'll renew the fight next year. If he succeeds, many localities might find the revenues they gain from the lottery wiped out by the loss of the receipts tax.
Many Democrats warn that if the state eliminates the BPOL, localities may be forced to raise local property taxes to make up the difference. But Republicans say localities should follow their example and make do with less.
Allen also is still talking about cutting income taxes next year, but won't unveil a specific plan until after the election - when he has year-end financial projections.
Similarly, Republicans have not specifically identified "wasteful spending" they want to cut. But they've been eying the state's 105,000-person work force. Last spring, 5,000 state employees took an early retirement offer that will save $40 million a year.
Democrats and Republicans say they can enact their plans without asking residents to sacrifice services. They are estimating that the tax base in Virginia will grow by about $500 million next year, providing new funds for all of their proposals.
What office-seekers are not saying is that the state already is confronted with a list of $700 million in new spending demands for next year that are not a part of anyone's campaign platform.
Keywords:
POLITICS
by CNB