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Showdown likely in Virginia legislature over retirement, education and health

By Rosalind S. Helderman and Anita Kumar
Washington Post Staff Writers
Sunday, February 6, 2011; 10:13 PM

RICHMOND - Budget writers in the Virginia House of Delegates and Senate unveiled competing plans Sunday to amend the state's budget, setting up a likely clash in the divided legislature in coming weeks over retirement funding for state employees and whether to begin restoring some cuts made to education and health care amid the economic downturn.

After wielding the knife for several years as state revenue plummeted during the economic decline, the legislature has some money to spend - the result of growing state tax collections.

Since December, Gov. Robert F. McDonnell (R) has twice informed legislators that he thought revenue would be healthier over the budget cycle than he had once predicted, freeing $489 million in new money - $152 million announced Friday.

Leaders in the GOP-led House Appropriations Committee and the Democratic-controlled Senate Finance Committee, which approved proposed budgets Sunday, urged caution, noting the soft economy and coming years' looming government obligations.

"While our economy continues to grow," said House Appropriations Chairman Lacey E. Putney (I-Bedford), "the fact is that we must continue to be ever vigilant."

The General Assembly has sliced billions of dollars' worth of state services in recent years. The two-year, $78 billion budget that is being amended pared back spending to 2006 levels as the population and demand for services for the needy ballooned.

The two chambers must reconcile differences in how they want to distribute the trickle of new money before the General Assembly adjourns Feb. 26.

Democrats and Republicans on the Senate Finance Committee agreed to reject a proposal advanced by McDonnell when he announced amendments to the budget in December that they spend $150 million in surplus cash on transportation. His suggestion was accepted by the House Appropriations Committee.

Senators have long said road money should come from dedicated revenue streams, not the state's general coffers.

"These dollars are better spent repairing the damage to our recession-racked education, public-safety and health-care programs rather than filling potholes," said Senate Majority Leader Richard L. Saslaw (D-Fairfax).

In part because of that position, the Senate was able to redirect about $100 million in new funding for public education and $105 million to restore deep cuts to Medicaid.

The House cut $93 million from K-12 education, said Robley S. Jones, director of government affairs for the Virginia Education Association. But it included $66 million to offer local governments the funding necessary to pay a 2 percent bonus for teachers.

What to do about the Virginia Retirement System is likely to be one of the most bedeviling fights between the House and Senate.

The House partially accepted a proposal by McDonnell to significantly change Virginia's pension system by requiring that state employees begin paying 5 percent a year into their retirement fund for the first time in nearly three decades. Virginia is one of only four states in which employees make no contribution to their pension.

But the House suggested fully offsetting the new contribution with a 5 percent salary boost for employees, a more generous proposal than McDonnell's recommended 3 percent salary increase.

The Senate committee decided that employees should continue to pay nothing into the fund.

The House and Senate want to give the state's universities more money than McDonnell recommended next year to jump-start the governor's plan to award 100,000 new associate's and bachelor's degrees over the next 15 years. The Senate provided $100 million, and the House proposed $94.3 million.

Both chambers restored nearly $17 million for Virginia Commonwealth University that McDonnell had recommended cutting as punishment after the Richmond school raised tuition 24 percent last year.

The House included $2.6 million for 1,700 new slots for in-state students at Virginia's top schools - the University of Virginia, the College of William and Mary, Virginia Tech and James Madison University. In-state students often lose slots to out-of-state students, who pay triple the cost and subsidize the state's cash-strapped schools.

The House wants to spend $50 million for economic development, and the Senate wants to spend nearly $47 million. The House chose several existing programs to support - and not necessarily those favored by McDonnell in a $54 million proposal.

The two chambers are still grappling with a recent attorney general opinion indicating that Virginia's Constitution does not permit giving state money to private charities.

The House and Senate eliminated a $500,000 grant to Operation Smile, a Hampton Roads-based charity that helps children with facial deformities that had been recommended by McDonnell. The Senate included money for food banks, another McDonnell suggestion, but the House did not.

Some items the chambers will probably clash over carry small price tags but major symbolic significance. The House adopted a recommendation from the governor that the state begin eliminating funding for public broadcasting, slashing $2 million over the next two years. The Senate will fight to retain the funding for public radio and television.

The House, but not the Senate, included language giving the governor the power to appoint a member to Metro's board of directors. McDonnell has tried for months to gain two state seats on the board. But localities in Northern Virginia, which have the power to appoint members from Virginia, have resisted.

heldermanr@washpost.com kumaranita@washpost.com

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