Kaine Tries to Salvage Priorities

Budget Squeezed By Lean Outlook For Va. Economy

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.