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Warner Makes Plans for Windfall

Proposal Has More For Transit, Salaries

By Michael D. Shear
Washington Post Staff Writer
Friday, December 17, 2004; Page B01

RICHMOND, Dec. 16 -- Virginia Gov. Mark R. Warner (D) will present budget amendments Friday that boost spending on transportation, public safety and education but fall short of the hopes of advocacy groups looking for big increases in state funding, administration officials said.

Warner's plan for the 2006 budget includes a 3 percent salary increase for state employees, an $824 million boost in transportation funding, increased spending on homeland security and a program to encourage economic development in rural Virginia.

Gov. Mark R. Warner is expected to announce proposed increases in spending for transportation and homeland security. (Steve Helber -- AP)

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Some lawmakers said they expect Warner to propose expediting the reduction of the grocery sales tax. On Thursday night, senior House Republicans said they will push to end the state's food tax next year.

For the first time since he became governor in 2002, Warner is offering a spending plan during good economic times; job growth has produced nearly $1 billion more in state revenue than economists predicted. And his proposals come after he persuaded lawmakers to increase taxes during the last General Assembly.

But for weeks, administration officials have been preparing groups that receive state money to be disappointed. Advocates for the environment, health care and colleges said they expect only modest increases.

"We have not heard that natural resources are going to be in for a very pleasant surprise," said Chuck Epes, a spokesman for the Chesapeake Bay Foundation, which is lobbying separately for a "flush tax" of $1 per household to improve water treatment.

Epes said that $32 million of the higher-than-expected state revenue by state law automatically will be put into a water improvement fund. But he said it's not nearly enough to begin to address Virginia's natural resources needs.

Warner, who faced billions of dollars in revenue shortfalls during his first two years in office, predicted Thursday that he would get "whacked" by people who want more spending and people who want less.

"There will be some . . . who will say, 'Governor, you didn't go far enough in terms of government meeting some of the needs,' " he said. "This is going to be a conservative budget we outline."

Recently, as the governor finished a long budget meeting, he turned to a senior aide and said, the aide recalled: "Boy, this just doesn't get any easier. I thought this time would be easier."

The reason it is not, according to Warner officials and senior members of the legislature, is that the cost of providing the largest state programs -- K-12 education and Medicaid -- is increasing rapidly, eating up revenue created by the state's improving economy.

Senate Majority Leader Walter A. Stosch (R-Henrico) this week issued a statement detailing more than $600 million in obligations that he said the state is required by law to meet before it starts or expands programs.

"Virginia is facing some very large bills," Stosch wrote. "The reality is, there is no surplus in Virginia, only a set of choices of how to best position our financial priorities."

House Speaker William J. Howell (Stafford) and several other top Republicans in the House said in a statement Thursday that their priorities will include the food tax reduction and elimination of a tax gimmick that helps the state's budgeting by charging small businesses for sales they have not yet made.

"A food tax cut delivers on a promise made to Virginians and helps those in all income levels, especially low- and middle-income families," Howell said. "Fixing the accelerated sales tax will help retailers and small businesses across Virginia."

On Thursday, Warner appointed Robert S. Bloxom, a Republican former delegate from the Eastern Shore, to a newly created position of secretary of agriculture and forestry, calling him "a perfect fit" to deal with the state's rural and forested areas.

The pick also allows Warner to add to the bipartisan flavor of his administration. Two Republicans he lured early in his term -- lobbyist James Hazel and former lieutenant governor John H. Hager -- have departed. Former senator Jane H. Woods, a Republican, is Warner's secretary of health and human services, and several Republicans are in key agency posts.

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