By R.H. Melton
Washington Post Staff Writer
Sunday, March 22, 1998; Page B01

RICHMOND—Basking in the afterglow of a largely successful legislative session, Gov. James S. Gilmore III was strolling through Capitol Square here this week but stopped in mid-stride to make a point about winning the largest tax cut in Virginia history.

"By driving home tax reduction, I've done two things," Gilmore said in an interview as he stood in the shadow of an 18th-century French monument to George Washington. "It's a good benefit for working men and women, and it requires the big spenders to make choices."

But in a delicious irony of politics, Gilmore himself will be one of those spenders, sprinkling $110 million across Virginia for new classrooms and perhaps setting state government on an unprecedented course of permanent school financing.

In the aftermath of the longest General Assembly session in history, Gilmore is enjoying the luxury of enacting the first part of his promised car-tax rollback while grabbing with gusto the school construction issue that Democrats used against him for the last two months.

That puts the new governor in the position of, in his words, "defining government in a much more conservative way, empowering people," while simultaneously "defining a fundamental role of government -- smaller classes and adequate facilities for our schoolchildren, which is an admirable goal."

All of which leaves the Democratic legislators who just left town hopping mad.

"Those folks don't understand the difference between governance and politics," fumed House Democratic Leader C. Richard Cranwell (Roanoke), a constant goad to Gilmore during the assembly session. "They lie like dogs" about their accomplishments, he said.

To strike back before an April 22 legislative session -- to consider vetoes and finalize car-tax and school construction measures -- Cranwell and other Democrats are planning a publicity road show. It will start at a Roanoke County high school this Saturday, complete with a school bus towing the kind of trailer-classroom where so many young Virginians are being schooled. A number of superintendents and school board members may go along for the ride.

"They may beat me, but I'm not going to surrender," said Cranwell, who has served in the legislature for nearly 30 years.

During the session, Democrats used the 1998-2000 state budget to link school construction to Gilmore's five-year tax rollback, a maneuver they believe could stunt the rollback over time by making it difficult to afford, while injecting fresh money into schools.

One Democratic scenario has two-thirds of all lottery proceeds going to schools, which would lock the state into providing $250 million a year. Combined with an equal match from localities, that could mean $1 billion every two years for Virginia schools, which have at least $6 billion in needs.

The Democratic linkage also resonated with some rural Republican lawmakers.

State Sen. William C. Wampler Jr. (R), who represents Bristol, on the Tennessee line, said lawmakers should explicitly link cutting the locally levied car tax and returning direct state aid to local school building.

"Any formula for school construction has to come with a formula for the car-tax cut," said Wampler, one of 12 budget conference negotiators.

The inverse also was true, Wampler argued. House and Senate negotiating teams knew that for the sake of fairness, localities that got the most benefit from the tax cut -- wealthy areas such as Northern Virginia -- had to be willing to send school aid to poorer regions in southwestern Virginia.

On the other hand, some GOP strategists cast the school construction debate as so much Democratic static, an important but ultimately sidelong discussion meant to divert Gilmore from his car-tax agenda.

Gilmore adviser Ray Allen said it was "almost comical" that Democratic-led lawmakers in the House of Delegates crafted a budget with a nearly $30 million hole in it, an amount Gilmore says he has to fill to fund school building fully.

"The great untold story is that the assembly did not pass a balanced budget," said Allen, a longtime GOP strategist and campaign consultant. "They just threw up their hands and said to the governor, 'Here, you fix it!' "

Gilmore is dead set against raising taxes for practically anything. "If you were raising taxes to do school construction, that would be a serious disconnect," he said in the interview.

But the overall state government budget will surely grow during his administration.

The state budget doubled during the 1980s, fueled largely by inflation and the arrival of 800,000 new Virginians. However, Virginia still ranks as a relatively low-spending state: about 40th in overall state and local government spending per capita, and 26th in the per-capita rankings of kindergarten through grade 12 spending per pupil.

Nevertheless, with each passing General Assembly, lawmakers seem more inclined to mandate additional programs that cities and counties must fund at the local level.

John Watkins (R), of suburban Richmond, who just moved to the Senate after 16 years in the House, said he was dismayed by cumbersome new programs ranging from new abortion restrictions to the car-tax repeal itself. "We have more mandates than ever before," he said.

Besides tax relief, the other big-ticket item for Gilmore this winter was money for 2,000 new teachers, an item lawmakers pared down considerably.

"On the one hand, he wants less government involved in the lives of individuals, which is one reason why he likes tax reduction," said Robert D. Holsworth, a political scientist at Virginia Commonwealth University. "However, he wants a larger public sector with all these new teachers.

"He can do both at the same time, thanks to this economy. It's a great time to be governor. It's easy to please all constituents at the moment."

Staff writer Spencer S. Hsu contributed to this report.