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Virginia governor to raise taxes, cut core services' funding

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By Anita Kumar and Rosalind S. Helderman
Washington Post Staff Writer
Friday, December 18, 2009

RICHMOND -- Virginia Gov. Timothy M. Kaine (D) will unveil a two-year budget Friday that will include tax increases and deep cuts to core services, including education and health care, according to sources familiar with the plan.

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Kaine will recommend cutting as much as 15 percent of the funding to colleges and universities and $200 million to K-12 education; closing two state mental health facilities; and reducing the state government's contributions to employee retirement plans, said Robert Vaughn, staff director for the House Appropriations Committee.

The governor, who will leave office Jan. 16, will announce his proposal in a speech to the General Assembly's financial committees Friday in Richmond. Many of the details had not been released, but some began leaking out Thursday.

Legislators and the incoming governor, Republican Robert F. McDonnell, will use the plan as a blueprint but will make changes based on their priorities and the economic forecast.

State officials are bracing for cuts of up to $3.5 billion over two years to accommodate Virginia's ongoing financial crisis.

Sources close to Kaine say he will propose a tax increase -- a move that Republicans, including McDonnell, would likely reject outright -- the only question being on what. The sources asked not to be identified so as not to preempt the announcement.

Kaine has made clear in recent days that he thought the shortfall had become so severe that he would have to make proposals to raise revenue to forestall some cuts to core government services.

Vaughn said that Kaine will propose eliminating the dealer discount, which allows retailers to retain a small part of the sales taxes they collect to cover the costs of administering the tax. The proposal would generate $60 million to $70 million.

One other option would be to reduce the amount the state spends to reimburse local governments for providing car tax relief, which would likely result in an increase in car tax bills. Additional options include an increase in the cigarette or income taxes.

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