Kaine Tries to Salvage Priorities
Budget Squeezed By Lean Outlook For Va. Economy

By Tim Craig
Washington Post Staff Writer
Tuesday, December 18, 2007

RICHMOND, Dec. 17 -- Gov. Timothy M. Kaine unveiled a two-year budget proposal Monday that increases spending on education, health care and environmental protection but relies on $2 billion in borrowing and does not raise taxes.

The $78 billion spending plan for fiscal 2009 and 2010 includes few bold initiatives. But it allows for modest progress on some of Kaine's priorities and represents his best chance to leave his stamp on state policy before his term ends in January 2010.

The budget, which would increase spending by about $4 billion over two years, attempts to broaden the safety net for poor and working-class people, even as a slumping housing market has eroded state revenue. Kaine (D) said that despite the fiscal challenges, he wants to create a framework that he or future governors can build on to improve care for the needy and the overall quality of life for state residents.

"I could have written . . . a 'stand in place budget' -- one with no innovation," Kaine said in an address to General Assembly finance committees. But "if we continue to be successful, we cannot just stand in place because revenues are tight. We have to continue to move forward."

Specifically, Kaine wants to create a program through which the state would work with small businesses to extend subsidized health insurance to 5,000 of the estimated 1 million uninsured Virginians. He also wants to enroll an additional 20,000 low-income children in pre-kindergarten.

And Kaine wants his legacy to include tens of millions of new dollars for the state's mental health system, whose serious weaknesses were exposed this year by the Virginia Tech massacre.

Republican leaders have rallied around his mental health proposals, but they expressed concern yesterday that Kaine hasn't done enough to insulate the state from what they fear is a looming recession.

"He has really set up a complicated situation for the future," said Del. M. Kirkland Cox (R-Colonial Heights), the House majority whip. "The problem is, you can want a legacy too bad."

Kaine is not seeking a tax increase this year. But to help address the slower growth in tax revenue, he is proposing a $10 increase in the $20 driver's license renewal fee, which state motorists pay once every five years, and higher fees for well and septic tank permits.

Kaine also proposes to divert $261 million, the most allowed under the law, from the state's reserve fund and to divert $180 million temporarily from highway construction programs. He said the highway money, appropriated for transportation last year, couldn't be spent next year. It would be replaced when the construction projects are slated to begin.

Kaine is recommending that the state require vehicle inspections every two years, instead of annually.

Besides saving the state money, Kaine said, the change would soften the impact of a proposed $4 increase in the $16 inspection fee.

Kaine said the budget includes almost $500 million in spending cuts through streamlining and other cost-saving measures.

"I have worked with my staff and Cabinet to find fiscally responsible ways to accelerate Virginia's progress in key areas, even in difficult times," Kaine said during his speech to the finance committees. "I told my Cabinet secretaries: 'Times are tight. There is no money for new initiatives, but bring me your best ideas for better service.' " But Kaine faces considerable challenges as he tries to push his priorities through the General Assembly, which in January will have a Senate controlled by Democrats and a House controlled by Republicans.

Noting former Federal Reserve chairman Alan Greenspan's recent warning that the nation may be headed into a recession, GOP leaders said the state cannot afford some of Kaine's initiatives. "When the bill comes due, we will still be here, but we will have a new governor," said House Majority Leader H. Morgan Griffith (R-Salem).

Jody W. Wagner, the secretary of finance, told lawmakers yesterday that Virginia can tap its reserve fund and still preserve its perfect credit rating.

But Del. Lacey E. Putney (I-Bedford), chairman of the House Appropriations Committee, said, "Responsible legislators should have genuine concerns about the overall soundness and long-term fiscal integrity of the spending plan."

Much of the new spending in Kaine's budget would be part of a $1 billion increase for public schools. Under Virginia's constitution, spending on education has to be adjusted every two years for inflation and changes in enrollment.

In an attempt to deliver a scaled-down version of a campaign pledge to provide 4-year-olds with universal access to pre-kindergarten, Kaine wants to make it possible for an additional 7,000 low-income children to enroll by 2010. The expansion would cost an estimated $56 million over two years.

Kaine is also seeking more funding for environmental protection and additional investments in higher education, as evidenced by his proposal to borrow $1.6 billion for 75 construction projects at colleges and universities.

In health care, Kaine is proposing to spend an additional $25 million over two years on programs that subsidize health insurance for Virginians. That would include expanded state-funded prenatal coverage to several hundred poor women.

Sen. R. Edward Houck (D-Spotsylvania) said Kaine has put forward "a progressive agenda for Virginia."

"The demographics in Virginia is really what is predicating this budget," Houck said. "You got increased demands on school-aged kids. You got this mental health crisis. You got all these uninsured Virginians. The governor has just identified what we know exists in Virginia."

Many of Kaine's spending increases would not take effect until 2009, by which time he expects the economy to improve. He proposes raises of 3 percent for state employees and 3.5 percent for teachers in July 2009 and would increase spending that year on programs to fight Chesapeake Bay pollution and preserve open space.

Kaine is projecting revenue growth to roughly double, from 3.2 to 6.6 percent, by 2009, but GOP leaders said he might be too bullish on the state's economic outlook.

"We are going to go through this budget line by line," said Del. Phillip A. Hamilton (R-Newport News).

Kaine, however, vowed to fight for his priorities during the legislative session that starts next month.

"This budget does an awful lot of good in areas I care deeply about," Kaine told reporters.