THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, January 27, 1996 TAG: 9601270245
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY WARREN FISKE AND MARGARET EDDS, STAFF WRITERS
DATELINE: RICHMOND LENGTH: Long : 132 lines
Last year, lawmakers fought a classic ideological battle over the future of state government. At issue was whether to slash the budget or to stay the course with Virginia's time-honored, slow-growth approach to spending.
Tradition won.
This year, no one is talking about a tax-and-spend revolution. The question for the '96 Assembly is whether the state has enough money to stay the course for education, prisons, mental health and a host of other services, even when it wants to.
Fearful that the answer is no, some lawmakers and influential business leaders are looking a few years down the road, and quietly beginning to float the dreaded T-word - taxes.
``I'm sure some of my more conservative constituents will be disappointed to hear me say it, but it seems to me there is a clear need for more revenue,'' said Del. Lacey E. Putney, I-Bedford, a conservative and the longest-serving member of the Assembly.
``The time has come to be frank and candid with the people of Virginia and to have the political courage to do what we know needs to be done.''
Because GOP Gov. George F. Allen has vowed to veto a taxincrease, lawmakers said it makes no sense to discuss that option before he leaves office in January 1998. ``There's no sense in sticking your head out if it's going to get chopped off,'' said Del. Glenn R. Croshaw, D-Virginia Beach.
But one powerful businessman raised the stakes last week by suggesting it may be time to start building consensus for a tax increase. Northern Virginia developer John T. Hazel, flanked by a group of state college presidents, offered to convene a blue-ribbon panel to assess the state's financial options.
Hazel, who heads a group of business moguls pushing for more funding for universities, said he hopes the need for a tax increase becomes a focus of debate in next year's gubernatorial election.
``It would be a shame, given the problems that have surfaced the past two years, to have that (election) played out without addressing the central problem of this state: where our financing is going to go.''
A more immediate problem, lawmakers say, is where the money will come from for this year's budget.
Legislators say Allen is counting on at least $200 million in revenues the state may never see to balance his proposed $34.6 billion state budget for the next two years.
At the same time, he may be drastically underestimating growth in Medicaid, the government health program for the poor, and his budget is $350 million shy of meeting widely proclaimed needs in the state's college and university system, they say.
While the Assembly has a track record of turning up untapped pots of money at the eleventh hour, five straight years of belt-tightening have all but exhausted the supply of budgetary tricks, lawmakers say.
As a result, this year's spending choices are becoming starker than ever and increasingly pitting the public's top priorities - such as education and public safety - against each other.
``I'm just sort of outraged he would give us a budget with this much fake material in it,'' said Del. Marian Van Landingham, D-Alexandria, referring to the proposed budget the governor presented in December.
Allen counters that the needs of universities are not as dire as Hazel and others claim and that complaints about the shaky assumptions in his budget are typical political banter. ``It's almost like a dance,'' he said. ``There are certain steps and gestures everyone has to make.''
Many legislators are hopeful that budget gaps will be eased painlessly next month when new projections of state tax revenues are available. But Allen said he is not hopeful the outlook will improve because sales appeared to be weak over Christmas and were hurt earlier this month by snow and ice.
The major questions about revenues are Allen's assumptions that:
The state will raise $67.3 million from two new lottery games - keno and Powerball. A substantial number of legislators have voiced opposition to the games, saying they would bring a more serious and potentially addictive form of gambling to the lottery. Allen has backed away from games, leaving the decision up to the legislature.
About $72 million in college construction needs can be funded by selling surplus state properties. But the administration has identified properties appraised at $36 million as suitable for sale and has acknowledged that it might not be willing or able to sell all of those.
The state will receive $95 million from the conversion of Trigon Blue Cross/Blue Shield from a non-profit concern to a for-profit business. Many lawmakers say the revenues are questionable because the settlement still needs to be approved by the General Assembly, the state Corporation Commission and probably the state Supreme Court. The state constitution requires that the budget balance at the end of the two-year cycle.
On the spending side, the primary concerns involve Medicaid and higher education.
In adding $123 million in state money to the $2.3 billion biennial Medicaid tab, Allen is assuming a growth rate of 3.9 percent next year and 3.7 percent the following one.
But Medicaid's annual growth rate has been dramatically higher each year of the last decade, ranging from 29.5 percent in 1991 to 7.4 percent in 1995.
The administration is counting on managed care for a portion of the state's Medicaid clients and declining welfare rolls to reduce the growth rate. But as recently as November, state Medicaid officials told the Senate Finance Committee that $240 million in new money would be needed over the biennium, $117 million less than Allen has allotted.
Noting that Virginia has slipped to 43rd among the states in per pupil spending for higher education, a group of business leaders and educators are pushing for up to $340 million more than Allen has allowed for that area.
A budget amendment to allocate that amount has received the bipartisan endorsement of the co-chairmen of the Senate Finance Committee - Sen. Stanley C. Walker, D-Norfolk, and Sen. John H. Chichester, R-Fredericksburg.
Both acknowledge that it probably will be impossible to come up with so much money this year, however.
Allen, who proposed $105 million in new funding for higher education, is skeptical that much extra can be found. ``Just because some people want to spend a lot of money doesn't mean we have to burden the taxpayers,'' he said.
The administration has also warned against borrowing money to help fund colleges, saying that the state's credit rating might suffer.
Complicating the budget-balancing debate will be numerous requests for adding money or restoring cuts suggested by Allen. Among the examples:
An Urban Partnership of business and government leaders is seeking $50 million for rewarding regional partnerships. Allen included none of that sum in his budget.
Church groups and others will be pushing to restore Allen's proposed 41 percent cut in General Relief, which provides subsistence support to poor people in certain localities. The proposed cut saves about $7 million.
Although financial options are limited, Democratic lawmakers are encouraged that Allen and many of Republican supporters have abandoned last year's effort to cut taxes and services.
``There's a lot of uncertainty about the budget this year, but at least this year there's some recognition by everyone that higher education has to be a top priority,'' Walker said. ``That makes things a whole lot better than they were last year.''
KEYWORDS: TAX INCREASE PROPOSED by CNB