THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, February 27, 1995 TAG: 9502270052
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY WARREN FISKE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Long : 225 lines
On the morning he would later dub ``the Thursday Massacre,'' Gov. George F. Allen made a last-ditch effort to save his tax-cut program from imminent death at the hands of the Democrat-controlled General Assembly.
It was Feb. 2 and Allen had invited his chief foe in the legislature - House Majority Leader C. Richard Cranwell - 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, a Roanoke County Democrat, 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?'' the governor asked.
Cranwell turned the question back to Allen. He complained that the chief executive had ignored repeated requests for a long-range list of state programs he would cut to pay for the tax reductions or to assure 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 promises to play a dramatic role in determining the future of state government and Allen's ultimate success as governor.
But beneath the grandstands, 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.
Allen was rebuked on a number of major proposals this year, including education reform, money to build prisons 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 central 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 two potentially horrific political consequences: Dormant 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 who rose in objection to his plans.
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 was kept a strict secret because of fears that unrefined plans might be leaked to the public and galvanize resistance.
Allen started putting the word out Nov. 30, when he made conference calls to tell Republican lawmakers that he soon would 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,'' recalled Del. Vincent F. Callahan Jr., R-Fairfax. ``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. Raymond R. Guest Jr., R-Warren.
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 E. Godwin Jr. and former U.S. Sen. Harry F. Byrd Jr. Godwin - who later would be instrumental in the defeat of Allen's proposal - and Byrd recently 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, were caught by surprise. Cranwell was sitting in his law office that day when he heard the news on the radio. Senate Majority Leader Hunter B. Andrews of Hampton was told by a reporter.
Allen seemed to delight in their distress. When Andrews requested a conference with Allen 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.
His tactics set up 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, noting that Allen was proposing $150 million in tax cuts at the same time he was seeking to increase state debt by an almost equal amount to finance prison construction, 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 clearly were in a quandary. Many rejected Allen's assertion that Virginia government is wasteful. After all, the commonwealth had been cited twice 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 is 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 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 about 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 Jan. 11, when the General Assembly convened for its 1995 session. Shouts burst out during a closed-door caucus of House Democrats. Speaker Thomas W. Moss Jr. of Norfolk urged compromise with Allen, arguing that rejection of a tax cut could be suicidal. Others, including Cranwell, Del. Clifton A. 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 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 polls, constituent letters or back-room 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 had formed in late 1993 out of concern that budget cuts were slowly gutting Virginia colleges. During the recession, the legislature sliced $400 million from higher education to balance the state budget. 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 sprang into action.
Although the group lists two dozen members, three men in particular led its assault: John T. Hazel Sr., a McLean developer and former rector of George Mason University; Joshua P. Darden Jr., a Norfolk businessman and former rector of the University of Virginia; and Hays T. 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 deep 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 for opposing the tax cut.
The coup, however, was achieved by Hazel. Working behind the scenes, he persuaded three former governors - Republicans Godwin and A. Linwood Holton and Democrat Gerald L. Baliles - to sign a letter deploring the cuts to higher education. The release of the letter on Feb. 1 provided the final measure of coverage to Democrats worried about bucking the governor.
The next day was 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,'' said state Sen. Kenneth W. Stolle, R-Virginia Beach. ``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 into 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 R. 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.'' ILLUSTRATION: [Color Photo]
George F. Allen
Hunter B. Andrews, Senate majority leader, was snubbed by Allen
during the tax cut debate. The governor seemed to delight in the
Democrats' distress, but they had the numbers to defeat his plan.
C. Richard Cranwell, House majority leader, felt no need to
compromise before ``the Thursday Massacre.'' He had talked Democrats
into rejecting a tax cut in an election year.
KEYWORDS: GENERAL ASSEMBLY GOVERNOR GEORGE F. ALLEN by CNB