Virginia Gov. James S. Gilmore III announced today that he will not use the state surplus or real estate transaction taxes to ease traffic congestion, as Democrats have urged, and said he is considering several other funding options before presenting his own plan next week.
Gilmore (R) said that using a portion of the state's national tobacco settlement is a "good solution" and that he also is open to repaying money borrowed earlier this decade from the state's road-building program. He plans to announce the transportation package Aug. 31.
The governor has not said how much he is willing to spend. Northern Virginia legislators from both parties have urged him to include at least $1 billion for their region. A state government source said today that Gilmore is considering a package that will total about $2 billion, with half earmarked for Northern Virginia.
The ideas of using tobacco settlement money and repaying the roads fund were among the few transportation proposals that escaped the governor's criticism today in a sharply worded speech to the state legislature's money committees. Gilmore's remarks, his most specific on the transportation issue, underscored how relief for traffic congestion has grown to dominate this fall's legislative races, particularly in Northern Virginia.
Lawmakers in both parties called the speech the most confrontational of Gilmore's 20-month-old administration. He dismissed the Democratic proposals to borrow against the state's real estate recordation tax. And he said the proposal to use the surplus -- which Gilmore today said was more than $167 million -- was fiscally irresponsible, "sloppy thinking." Democrats hoped those plans would raise nearly $1 billion for transportation.
"These proposals would be a financial disaster for the state and a roadblock to the prosperity of future generations," Gilmore said.
The negative tone irked Democrats and some Northern Virginia Republicans, who have pushed Gilmore to address an issue they fear could cost them close legislative battles in the Washington suburbs. Del. Harry J. Parrish (R-Prince William) and Sen. Warren E. Barry (R-Fairfax) were among those who favored calling a special session of the General Assembly to address devoting the surplus to transportation.
Del. Vincent F. Callahan Jr. (R-Fairfax), chairman of the top House budget-writing committee, called Gilmore's speech "rather aggressive. I've never heard one quite like it" in 31 years in the legislature.
"He was more preaching to us than anything else," Barry said.
Today's speech opened with sunny economic news. Tax revenue was up 10.6 percent in the fiscal year that ended June 30, ahead of even optimistic forecasts.
But Gilmore quickly dismissed the notion that the $167 million surplus would be available for an instant cash infusion to transportation. The Rainy Day Fund, cleanup of waterways and other purposes required by state law claim all but $8.2 million, he said. The plan favored by Democrats and some Republicans would have put half the surplus toward road building.
"Such a proposal shows a deep misunderstanding of accounting principles employed by the commonwealth," Gilmore said. Advocates of using the surplus said the governor was understating Virginia's flexibility in spending the money.
Gilmore also dismissed a Democratic proposal to raise $710 million by borrowing against the recordation tax, collected every time a house or other real estate sells. That source fluctuates so wildly, said Gilmore, that to borrow against it would require the state to issue low-grade "junk bonds," not the top-rated, low-interest bonds Virginia typically uses.
But two other proposals backed recently by the Democrats have Gilmore's attention: raising $1 billion by borrowing against the state's portion of the national tobacco settlement and $300 million by repaying the state's transportation trust fund.
Gilmore called the Democrats' tobacco proposal oversimplified but suggested it had merit, echoing remarks he made in his State of the Commonwealth Address. Rather than borrowing $1 billion, as Democrats suggested, he may choose to trade Virginia's tobacco settlement proceeds for a lump-sum payment of cash, much as lottery winners can do, administration officials said.
As for repaying the transportation trust fund, Gilmore told reporters after his speech that "it's a matter that we are considering."
During the recession of the early 1990s, Gov. L. Douglas Wilder (D) and a legislature controlled by Democrats transferred $200 million from the transportation fund to the general fund. Gilmore could put $300 million into transportation by transferring the money back with interest. He declined to criticize the idea today, instead taking a shot at Democrats for not repaying the money sooner. "The Democrats have no credibility on a proposal like that," he said.
Gilmore left few other options open. He didn't rule out directing future budget surpluses to transportation. Borrowing against the general fund, that part of the budget supported largely by income and other broad-based taxes, remains an option as well, though some key lawmakers would rather stick to Virginia's tradition of paying for road construction in cash.
The governor has ruled out any plan that involves tax increases, his aides said. That makes plans favored by Northern Virginia business leaders to raise local income or sales tax rates unlikely. Tax increases also have little support among lawmakers, all of whom are running for reelection.
Democrats said that they were happy to see Gilmore focus on the transportation issue but that he was too hasty in dismissing ideas.
"I think the governor either misunderstood or intentionally misrepresented our proposals," said Sen. Janet D. Howell (D-Fairfax). "We may have lost some opportunity to make some real changes quickly."