ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, January 29, 1996 TAG: 9601290099
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
DATELINE: RICHMOND
SOURCE: WARREN FISKE AND MARGARET EDDS STAFF WRITERS
SOME LEGISLATORS have begun arguing that Virginia needs to find ways to boost revenues because of a gap between funds and the call for more money for education and other services.
Last year lawmakers fought a classic ideological battle over the future of state government. At issue was whether to slash the budget or 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 '96 Assembly's big question is whether the state has enough money to support 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 Putney, I-Bedford, a conservative member of the House Appropriations Committee 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 Allen has vowed to veto a tax increase, 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 Croshaw, D-Virginia Beach.
But one powerful business leader 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 leaders 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 argue, 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 11th hour, five straight years of belt-tightening have all but exhausted the supply of budgetary tricks, lawmakers claim.
As a result, this year's spending choices are becoming starker than ever and are 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. Putney has even introduced a bill to ban the new games. Allen has since backed away from keno and Powerball, 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 nonprofit 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-student 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 - Sens. Stanley Walker, D-Norfolk, and John 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 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 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 cooperation. 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 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."
HIGHER TAXES ON THE HORIZON?
In Virginia, the General Assembly must OK a budget every two years. At this stage in the 60-day legislative session, the budget bill is being worked on by both Senate and House committees, and talked about by everyone.
KEY QUESTIONS
Can Virginia:
move forward with the public's priorities - education and public safety - without a tax hike sometime in the next few years?
Some people in Richmond are beginning to whisper the T-word.
bring in $67.3 million from two new lottery games - keno and Powerball?
Stung by critics of the games, the governor punted this idea to legislators.
fund $72 million in college construction needs from sale of surplus state properties?
The list of properties adds up to only $36 million.
count on $95 million from the Trigon settlement?
That money won't be in hand for awhile.
count on extra sales tax revenues?
The numbers come out next month. But retail sales were weak over Christmas and during the big snow.
estimate the Medicaid tab accurately?
Gov. George Allen's budget contains $117 less than state Medicaid officials said last fall they'd need.
possibly find the $340 million business leaders and educators want for higher education?
LENGTH: Long : 180 lines ILLUSTRATION: GRAPHIC: Chart by staff: Higher taxes on the horizon? color. KEYWORDS: GENERAL ASSEMBLY 1996by CNB