The Kaine Mutiny

Gov. Mark Warner persuaded Virginia Republicans to raise taxes. His successor tried and failed.Opinion Journal, Wall Street Journal

BY FRED BARNES Thursday, June 29, 2006 12:01 a.m. EDT

ALEXANDRIA, Va.--Tim Kaine, Virginia's popular new Democratic governor, called for a tax increase. The Republican-controlled state Senate voted in favor of a tax hike and forced a three-month budget impasse in hopes of getting its way. Even much of the business community, especially politically influential developers in northern Virginia plumping for road and transportation funds, sought to raise taxes. Most of the big newspapers argued for higher taxes.

And yet, Virginia did not raise taxes: The Legislature produced a political surprise last week. Thanks to a recalcitrant House of Delegates, led by Speaker Bill Howell, it gave up on a $1 billion a year tax increase over two years--which had been proposed despite a projected budget surplus of $1.5 billion. And that increase would have come on top of a tax boost of $2.8 billion in 2004 under the previous governor, Democrat Mark Warner.

Mr. Warner had promised not to raise taxes during his 2001 gubernatorial campaign, but still managed to woo enough Republican legislators to win approval of his tax hike. Soon after it passed, state officials disclosed a budget surplus that nearly matched the amount the increase was projected to raise. Nonetheless, the tax issue made Mr. Warner a national figure as a Democrat who could persuade a Republican Legislature to increase taxes. Indeed, he is now exploring a bid for the Democratic presidential nomination in 2008.

Mr. Kaine, too, vowed in his campaign he wouldn't raise taxes. Four days before his election last November, he told an interviewer: "I'm not going to be in for tax increases because we did it in 2004 and we're going to have to live within our means." Six days after he was inaugurated in January, he abruptly changed his tune, announcing a plan to raise "modest, reliable revenues" of $1 billion to fund urgently needed transportation improvements.

To the obvious question--why not tap the surplus in general revenues to pay for transportation?--came the answer: No, that was strictly for education, health care and other nontransportation uses. The money would have to come from the separate transportation fund, which needed replenishing.

This was a not-so-clever dodge. General funds, according to Speaker Howell, are regularly used for transportation. "That's absolutely true," noted Larry Sabato of the University of Virginia, the state's leading expert on policy and politics. These revenues, for instance, paid for Highway 58 along the state border with North Carolina. So that argument fizzled.

Still, the Senate Republicans, more liberal than their House counterparts, were already on board with Mr. Kaine's tax hike. The chairman of the Senate Finance Committee, John Chichester, actually favored an even larger tax increase than Mr. Kaine advocated. Another senator, Russell Potts, had signed a pledge not to support any tax increase, but he too was allied with Mr. Kaine.

The problem, then, was convincing the House of Delegates. Using funds from his political action committee, Mr. Kaine mounted a broad multimedia campaign--radio, direct mail, phone banks--on behalf of his tax proposal. In radio ads, he complained his "long-term statewide solution" to traffic congestion and "out-of-control development" was being blocked by House Republicans. "I need your help," he pleaded. "Urge your delegate to get moving." But the ads flopped. Not a single Republican delegate sided with Mr. Kaine.

The problem for Mr. Kaine on the House side was simple, Mr. Howell said. "Fool me once and it's your fault," he said. "Fool me twice and it's my fault." In 2004, 17 Republican delegates had broken ranks and voted for Mr. Warner's tax increase. This prompted a backlash among conservative voters, particularly after the bulging surplus was disclosed. Every one of the 14 Republican tax-hikers who returned to the house after last fall's election learned the lesson and stuck closely with Mr. Howell this time around. They unswervingly opposed the governor.

Mr. Kaine lacked the political skills that Mr. Warner had deployed in attracting Republican support. Mr. Warner, a cell-phone mogul in Alexandria before winning the governorship, often ate lunch with Republican delegates. He invited them to dinner. He occasionally played basketball with them. Mr. Kaine is a bit stiffer and less social than Mr. Warner, and certainly not as politically adept...

There's a final lesson, a hardy perennial: Never trust a candidate who promises not to raise taxes. Mr. Sabato moderated a campaign debate in which, he said, "we asked [Mr. Kaine] three different ways if he would raise taxes. The answers were no, no, no." Mr. Kaine might have meant it at the time. But we now know, his promises weren't binding. Such promises rarely are.

Mr. Barnes, executive editor of The Weekly Standard, is author of "Rebel in Chief" (Crown Forum, 2006).

http://www.opinionjournal.com/cc/?id=110008581

How to Progress: Senate's Insistence On New Taxes Dislodged Plan

SPEAKER BILL HOWELLGUEST COLUMNIST Richmond Times-Dispatch Sunday, June 25, 2006

Stafford -- With a bipartisan majority passing a new two-year spending plan, the General Assembly has fulfilled one of its primary responsibilities. Much attention understandably has been focused on the delay in reaching this point.

Important issues were at stake in this year's budget debate, including whether Virginians would have a second major tax hike in three Assembly sessions -- this one during a time of large budget surpluses -- and whether our constitutional procedures for appropriating taxpayer funds would be honored. As a result of the House's resolve, a burdensome and unnecessary tax increase was avoided, and our constitutional obligations were met. With the impasse over taxes, many Virginians may have overlooked the positive actions reflected in the new budget. The plan is a solid one that addresses many of our most pressing needs, especially in public education, Chesapeake Bay revitalization, mental health, and public safety. In addition, we acted to strengthen our economy and create jobs by eliminating Virginia's death tax that harms small, family-owned businesses.

Still, the General Assembly missed an opportunity to invest more of the available revenues in transportation. The House of Delegates fought hard for another major infusion of cash for transportation -- more than $1 billion -- without increasing taxes. Unfortunately, the Governor and his Senate allies seemed more interested in justifying higher taxes than in allocating more of our existing revenues, including an unprecedented $1.5-billion surplus, to help to ease the hardship for commuters. Indeed, even after surrendering on the tax-hike issue, high-tax advocates were deliberately trying to "starve" transportation funding and increase pain for commuters as a way to bolster their case for another major tax hike.

Innovative Solutions Needed When legislators reconvene later this year on transportation, we must move beyond the exhausted tax-hike debate to a serious discussion of innovative solutions, genuine reform, and balanced spending priorities. Sensible solutions involve far more than just raising taxes, throwing more money at VDOT, and hoping that traffic congestion goes away sometime soon. History has shown that does not work. Even candidate Kaine last year acknowledged that you can't pave your way out of congestion.

It's time for Governor Kaine to join us in developing a sensible, creative plan that will address our state's transportation needs in this new century. Our fast-growing economy gives us an opportunity to do so without raising taxes.

It is also time to reject the tax-related brinkmanship that has delayed budget action in recent years. This session marked the third major budget impasse since 2001. A common denominator has been the Senate's insistence on higher taxes, and its unprecedented tactic of holding the entire budget hostage to accomplish its tax-raising goals.

Budget hostage-taking (by embedding tax increases in appropriations legislation) violates our Constitution and sullies our state's reputation for fiscal management. Additionally, it makes hostages out of schoolchildren, the needy and disabled, law-enforcement officers and other first-responders, and dedicated government employees at all levels -- indeed, everyone who depends on state government. Virginia did not become the best-managed state in America by threatening each year to interrupt vital services unless one politician's or one chamber's vision of higher taxes were realized. And, we will not remain a well-managed state -- nor will state government continue to deserve and enjoy the respect and trust of our citizens -- if this insidious tactic continues to be used. Fortunately, I believe this tactic has been so totally discredited that it won't be used again.

Constitutional Safeguard The House, by a large bipartisan majority, passed a joint resolution in 2005 to strengthen the Constitution by restricting the appropriations bill to revenues that already had been enacted at the time of the spending bill's introduction. The Senate failed to approve this sensible safeguard, but perhaps it will reconsider now. It would help put us back on track toward a timely budget process.

Of course, the real problem remains the incessant pressure to raise taxes. It was disappointing to see Governor Kaine, who pledged last year not to raise taxes, come into office and immediately break his promise, demand the largest tax increase in Virginia history, and endorse budget hostage-taking tactics as a means of achieving that goal.

For there to be bipartisan progress on transportation and other issues in the months and years ahead, we need to unite behind an approach that keeps faith with the people of Virginia, respects the Constitution, and empowers citizens to help make decisions that will chart our future. Bill Howell represents the 28th District in the Virginia House of Delegates, where he serves as the Speaker. This story can be found at: http://www.timesdispatch.com/servlet/Satellite?pagename=RTD%2FMGArticle%2FRTD_BasicArticle&%09s=1045855934999&c=MGArticle&cid=1149188706933&path=%21editorials%21commentary

Excerpts of Statement by The Honorable Vincent F. Callahan, Jr.

June 20, 2006 Mr. Speaker and Members of the House:

On behalf of my fellow conferees, I am pleased to deliver the much anticipated conference committee report to House Bill 5002. To say it took awhile would be an understatement. However, to say that the document before you today is one of the finest in my 38 years of serving in the House would belie the importance of what was at stake...

Article IV, Section 12 is quite clear in that “No law shall embrace more than one object….” A bill to appropriate revenues should not be a bill to raise revenues. Each serves a different purpose, underscored by the fact that in the House we have two different Committees, charged with the respective responsibilities.

The provisions of Article IV, Section 12 are important, if we violate that principle, we potentially subject the law to a court challenge. Equally important is our responsibility under Article X, Section 7, which states that “No money shall be paid out of the State treasury except in pursuance of appropriations made by law…”

The dilemma from my perspective was this: in order to preserve one Article of the Constitution -- not embedding tax increases in the budget -- we were confronted with the prospect of brushing up against another provision – the approval of an Appropriations Act by July 1.

In my view, these two provisions are not mutually exclusive. Fortunately Mr. Speaker, your House Conferees preserved both Articles of the Constitution.

Several weeks ago my friends from across the aisle suggested that if we were school kids we would have flunked for turning our assignment in late. Well, the same could be said that if we violated school policy we would be suspended. But, Mr. Speaker we are not school kids. We have been duly elected to do the people’s work. In doing so, we must comport to the Rules established by the people on November 3, 1970.

With regards to the specifics of the Conference Committee Report, as we started this Conference Committee the number of items in dispute were not great, however, there were several significant policy differences that we needed to resolve.

One of the major differences was the Transportation Reserve Fund. In general there was agreement that we should set aside funds for transportation that would be allocated upon conclusion of the adoption of a new biennial budget. Unfortunately, the House Conferees had two issues to wrestle with. First was the funding level and the second was the accompanying language. The House did not support the Senate’s position on either front. However, it became quite clear that the Senate would not budge from the amount of funding in the Reserve. The Senate was aided in this endeavor by the Governor who stated his willingness to sign a budget with only $568 million, an amount less than the $625 million he proposed in his budget. With regard to the language, the House Conferees prevailed on two fronts. First, the language requiring an undefined threshold of revenue that would need to be generated for transportation during a subsequent Session was removed. Likewise, language that would have redirected the Reserve Fund to other purposes was also removed. The final agreement of the Conferees appropriated these dollars in the Department of Transportation with language stipulating that the specific allocation of the funds will be determined through separate legislation not contingent on a tax increase.

There were other facets of the Conference agreement on which the House prevailed. For example, the House Conferees insisted that two years of salary increases be contained in the budget for all state and state supported employees.

In arguing our position, the Senate seemed insistent on leaving out school teachers from the second year pay raise. At one point, the Senate proposed funding the raise by reducing the amount of funding that already been agreed to for transportation. To pit transportation against a second year pay increase for public school teachers seemed a bit hypocritical.

All too often we have built our biennial budget providing a first year pay raise, leaving the second year unaddressed in the hope that revenues will grow sufficiently so that we can address pay raises during the odd-year Session. To leave an unfunded second year obligation in a two-year budget in our opinion was fiscally unsound.

In the end, the House Conferees prevailed and provided two years of pay raises for all employee groups.

In the area of Higher Education, the conferees recognized the need to provide additional resources to our colleges and universities to slow the growth in tuition and to meet our future enrollment growth, especially at our Community Colleges. The actions of the Conferees both in capital construction and operating support will ensure that we can meet our future demand.

In the area of Health and Human Resources, the conferees found much agreement in our desire to address the “safety net”. The conference budget provides funding for an additional 473 MR waivers for individuals currently on the critical community waiting list. In addition, funding for 65 new developmentally disabled (DD) slots for individuals age six and older with disabilities such as autism or cerebral palsy are provided.

Mr. Speaker, the conference committee report that is before you represents several compromises. But in the end the House Conferees did not compromise what was right.

As I reflect on this Conference Committee report, I am reminded of my dear friend and mentor Earl Dickinson who passed away last week. During our four years together as Co-Chairs I learned a lot from him. When I assumed the Chairmanship in 2002, I had the advantage of reflecting on the past practices of legislative budgeting in determining the course of action for the future. If there is a legacy to be had, my hope was that whatever we did, we did it right.

Mr. Speaker and Members of the House, I think this conference has produced a report that directs funds to established priorities that maintain and reaffirm our previous commitments to the citizens of the Commonwealth.

I thank all of the budget negotiators for their good work and good humor.

With that, Mr. Speaker and Members of the House, I ask that you accept the conference report on House Bill 5002.

###

2006-2008 Budget Agreement Highlights

Highlights of the concord include no tax increases, no new debt, full Death Tax Repeal, $9.4 billion in transportation spending for the biennium with an additional $339 million to be allocated later in special session. There will also be $200 million in funding for Chesapeake Bay clean up. The Assembly is committing funds for a 300-bed facility for Virginia’s Civil Commitment Program to assist in the recent legislative crack-downs on Sexually Violent Predators. State Employee, Sheriffs’ Deputy, and College Faculty will received pay raises of 4% increase in FY07 and 3% increase in FY08 along with funding for state-portion of pay increase for public school teachers equal to 4% for FY07 and 1.5% for FY08.

Peace Announces Budget Agreement

Mechanicsville, VA - If ever a time existed when the adage "Patience is a virtue" meant so much that time is now. Lawmakers reached an agreement late Friday on a new state budget. Formal action to adopt this agreement will occur on Monday in the Senate and Tuesday in the House of Delegates. Anticipated passage of $72 billion, two-year spending plan will end the unprecedented stalemate two weeks ahead of the commencement of the 2006-2008 financial calendar. "This agreement by the budget negotiators marks a new beginning for all Virginians and I am grateful for the support of my neighbors in the 97th District who supported my position to oppose $1 billion in new taxes. We can truly say that we held the line," said Del. Christopher K. Peace (R-Mechanicsville).

Holding up the process was a Senate Leadership proposal of imbedding taxes into an appropriations bill which many in the House deemed unconstitutional. Tax bills have to be separate measures passed by the Finance committee in the House rather than the Appropriations committee. Del. M. Kirkland Cox, R-Colonial Heights. "I think this forever discredits the practice of trying to put tax increases in the budget." This compromise comes approximately 96 days after the close of the regular session. The budget agreement will be submitted for gubernatorial review and legislative reconsideration of vetoes and amendments by June 30.

Highlights of the concord include no tax increases, no new debt, full Death Tax Repeal, $9.4 billion in transportation spending for the biennium with an additional $339 million to be allocated later in special session. There will also be $200 million in funding for Chesapeake Bay clean up. The Assembly is committing funds for a 300-bed facility for Virginia's Civil Commitment Program to assist in the recent legislative crack-downs on Sexually Violent Predators. State Employee, Sheriffs Deputy, and College Faculty will receive pay raises of 4% increase in FY07 and 3% increase in FY08 along with funding for state-portion of pay increase for public school teachers equal to 4% for FY07 and 1.5% for FY08.

Ironically, the long awaited budget agreement comes on the same day Secretary of Finance Jody Wagner released her monthly state financial report. "Our Virginia economy is remarkable. Joblessness is at new lows and state revenues are nearly 10% more than they were at this point last year. Clearly this was not the time to raise taxes. Let's reward small businesses and working people rather than penalize them with higher taxes," Peace said.

Total general fund revenue grew 18.1 percent in May. Strong growth in individual withholding taxes and extraordinary growth in individual nonwithholding taxes offset weak collections in sales and use taxes, recordation taxes, and corporate income taxes. On a year-to-date basis, total revenue has grown 10.3 percent. Fiscal year 2006 revenues are overstated on an annual basis because revenue losses from the reduced Accelerated Sales Tax program and the reduction on the sales tax on food that will occur in the last month of this fiscal year are not reflected in collections to date. Accounting for these known revenue losses, total general fund revenues are increasing at 8.5% -- ahead of the annual 7.4% forecast.[1] --------------------------------------------------------------------------------

[1] Secretary Jody Wagner's May revenue report to the Governor, June 16, 2006

Now is time to repeal Va. estate tax

Now is time to repeal Va. estate taxOp-Ed by Del. Ed Scott Culpeper Star-Exponent June 6, 2006

As we near the end of a special session dominated by discussions of taxes and transportation, it is important to remind Virginians of an important tax issue that has gotten little attention but has much support. Unfortunately, in the hustle and bustle of the legislative process and discussions about tax increases, talk of repealing Virginia’s estate tax can be lost.

This unfair tax, and the cost of avoiding it, promotes the sale of land devoted to farming, forestry and open space. According to the Joint Economic Committee of the United States Congress, “through 2001, 2.6 million acres of forest land were harvested and 1.3 million acres were sold each year to raise funds to pay for estate taxes.”

The estate tax, or death tax as it is often known, takes money away from family businesses, preventing job creation and harming the ability of business owners to provide the best health insurance possible for employees. It unfairly hits minority- and women-owned businesses, robbing first-generation businesses of the ability to pass on strong and vibrant businesses to the next generation.

The House of Delegates this year once again endorsed full repeal of the death tax in a bi-partisan manner, with 93 of 100 members supporting repeal. I was pleased to co-patron this legislation. In special session our House budget (HB 5002) includes nearly $100 million in revenue reductions to address repeal of the death tax in 2007.

The Senate originally indicated support, with 24 Senators endorsing repeal early in the session. However, they fell back to a failed partial repeal version in the midst of session, presumably as a political bargaining tool to leverage compromise from the House of Delegates.

Even Gov. Tim Kaine has endorsed full repeal of the estate tax, campaigned on it last fall, and repeated his support when the House of Delegates endorsed repeal earlier this year. But he cannot sign it if legislators do not agree to send it to his desk.

When the House and Senate endorsed full repeal of the death tax in 2003 the state’s biennial budget was $60 billion. It has grown over 25 percent since then to $75 billion. In 2003, the annual General Fund budget (composed mainly of income, sales, recordation and corporate taxes) was about $12 billion. It has grown about 50% to nearly $18 billion a year. Clearly, Virginia can afford to repeal this tax to protect family farmers and small business owners.

This year is the opportune time for Virginia to repeal this burdensome tax once and for all. Most other states do not collect this tax, allowing the wealthy to avoid it by moving to Florida, Tennessee, West Virginia, or any of 32 states that do not have such a tax. However, family farmers and small business owners who are land and equipment rich but cash poor will be stuck footing the bill, even selling business assets to pay or avoid the tax.

I am hopeful the House of Delegates will prevail in efforts to protect Virginia’s economy and job creation by repealing this inequitable tax. I will remain in communication with my colleagues in both parties and both chambers urging that the death tax be repealed in Virginia once and for all.

Delegate Ed Scott, R-Madison, represents Culpeper, Madison, and part of Orange County in the Virginia House of Delegates

Virginians Reject Higher Taxes for Transportation

Executive Summary – Virginia Statewide Survey This Virginia statewide survey was conducted by McLaughlin & Associates among 800 likely voters between May 21-22, 2006. All interviews were conducted via telephone by professionally trained data collectors on McLaughlin & Associates’ state-of-the art CATI (Computer Assisted Telephone Interviewing) system. Respondent selection was at random. This sample of 800 likely voters has an accuracy of +/- 3.4% at the 95% confidence interval.

The survey results clearly illustrate that the voters in Virginia do not want to see any tax increases even if the revenue would be used for transportation projects that would ease traffic congestion. This strong voter sentiment is evident across geographic and party lines. Even in areas such as Northern Virginia, where traffic congestion is often the number one issue, the voters don’t want to see higher taxes. The large majority of voters believe Virginians are already overtaxed and that there is enough money in the state budget to solve Virginia’s transportation problems without raising taxes. Even though Tim Kaine spent $350,000 on ads and voter outreach to promote his policies, the survey illustrates the lack of support Tim Kaine is receiving for his budget and tax proposals. The voters are clearly at odds with Tim Kaine’s proposals and stance on how to pay for transportation projects. The survey results indicate that the voters will hold Tim Kaine and those who support plans similar to his responsible for higher taxes.

Less than half (42%) of Virginians approve of Tim Kaine’s budget and tax proposals. Even among those who approve, the approval rating is soft. Only 15% strongly approve while 28% somewhat approve. Almost one-third (32%) disapproves of Tim Kaine’s budget and tax proposals. Regardless of geography, Tim Kaine is unable to garner majority support for his proposals. He only gets majority support from Democrats but still the support from his own base is soft.

More than two-thirds (68%) of the voters believes the taxpayers of Virginia are already overtaxed and there is enough money in the state budget to solve Virginia’s transportation problems without raising taxes. This clear majority sentiment is evident across the board including among voters in Northern Virginia and Democrats.

When asked which long range solution for increasing local transportation funding would they favor most, the majority (60%) of voters choose a solution that does not increase taxes but instead either uses some of the increased tax revenue generated from earlier tax increases and economic growth or stops the practice of raiding the Transportation Trust Fund. Less than one-third (30%) thinks the state should raise taxes in some form. This majority sentiment against increasing taxes to fund transportation cuts across all geographic and party lines including voters in Northern Virginia and Democrats.

Which of these long range solutions for increasing local transportation funding would you favor most?

1. A regional tax increase IF approved by local governments in the region

2. A regional tax increase IF approved by voters in a regional referendum

3. A regional tax increase PLUS a statewide tax increase

4. No tax increase but instead using some of the increased tax revenue generated at the state level as a result of earlier tax increases and Virginia’s economic growth.

5. Stopping the practice of raiding the Transportation Trust Fund so we can solve Virginia’s transportation problems without raising taxes.

By more than a 3 to 1 margin (68% to 22%) the large majority of Virginians believes the state should spend the money needed to improve transportation without raising taxes and should require more accountability and end wasteful spending at V-DOT instead of raising taxes by more than $1 billion dollars annually statewide to provide a dedicated, sustainable source of transportation funds and to ensure that funds for other priorities like education, health care and public safety don’t compete with funds for roads. As seen in the previous results, regardless of geography or party, the voters don’t want to see higher taxes for transportation.

Three-quarters (76%) of the electorate disapproves of a proposed State Senate plan to raise the state’s gasoline tax by six cents per gallon in order to fund transportation projects to ease traffic congestion. Only 20% approves of the proposal. Whether a State Senator is a Democrat or Republican, they would be hurting themselves in their own base and among swing voters if they voted in favor of this proposal. Even in the areas where traffic congestion is often the number one problem (Northern Virginia), the large majority disapproves of raising the state’s gasoline tax to fund transportation projects to ease traffic congestion.

The House of Delegates, who refuses to approve any budget that increases taxes on Virginia taxpayers, is the least likely to get blamed if there is not a budget agreement and there is a partial shutdown of the state government. The majority (55%) would either blame Governor Kaine who refuses to sign any budget that does not include an annual tax increase of as much as $1 billion dollars for transportation (28%) or the State Senate who refuses to approve any budget that does not include an annual tax increase of as much as $1.8 billion dollars for transportation (27%). Clearly, the blame will mainly fall on the shoulders of those who favor a tax increase even if it is for transportation. This public opinion is evident across all key voter segments.

Wall Street Journal: VA Tax Rebellion

May 31, 2006; Page A12 Big news from Richmond, Virginia: Republicans are starting to act like, well, Republicans again.

Last week a gang of conservative GOP members in the general assembly foiled Democratic Governor Tim Kaine's plan to raise $1.4 billion in car, gasoline and diesel taxes to pay for more roads and mass transit. This was a victory against long odds, because the renegade House members were lined up against the Governor, powerful Republicans in the state senate, elements of the business community and the state's largely pro-tax media .

Mr. Kaine, who only last year took the Governorship over fractured Republicans, was trying to repeat the tax increase passed by his predecessor Mark Warner in 2003. He was also tapped to deliver the Democratic State of the Union response to President Bush earlier this year. And after Republicans who control the state assembly refused to budge, Mr. Kaine barnstormed the state to make his case.

"The more he criss-crossed the state to win votes," says Whitney Duff, president of the Virginia chapter of Americans for Prosperity, which also opposed the tax hike, "the less popular the taxes became." Voters began to wonder why a state with a $2.5 billion budget surplus would need higher taxes only three years after imposing the largest tax increase in state history. It didn't help that Mr. Kaine was trying to raise gasoline taxes (currently 18 cents a gallon) amid soaring gasoline prices.

Governor Kaine says he'll keep pushing his campaign, and Democrats are accusing Republicans of forcing the state into endless gridlock. Republicans respond that they also want new roads but not new taxes to pay for them when state coffers are overflowing with cash. The successful show of principle by House Republicans has helped to revive a demoralized state GOP, and it demonstrates once again that the tax issue hasn't lost its political salience. That's a lesson Republicans in a few other states could also learn.

URL for this article: http://online.wsj.com/article/SB114903916499167053.html

Comments on Senate Amendments to House Bill 5002

The Honorable Vincent F. Callahan, Jr.Chairman of House Appropriations Committee

"Mr. Speaker and Members of the House:

It is said that good things happen to those that wait! Well we waited and I believe that the good news we received from the Senate this past Tuesday was well worth the wait.

Ever since we arrived in Richmond last January, our primary obligation to the citizens of the Commonwealth has been the adoption of a new two-year spending plan. However, despite the relatively few, but not insignificant, differences that existed in our respective budget, we were hampered from resolving them because of two underlying issues.

The first was that we would not discuss a budget that contains a tax increase in violation of the state Constitution. For some, our principled stand was considered a “red herring”. However, to me and my fellow conferees the Constitution is much bigger than anyone person -- it represents the very fundamental purpose of our legislative existence.

The second issue was the recognition that given the complexity and differing views and solutions to addressing transportation we should set aside the transportation discussion until after we completed the budget.

In a show of good faith, we set the House’s transportation initiative into a new Transportation Program Reserve Fund contained in the Central Appropriations section of the budget. Under the accompanying language in the amendment, these monies would be allocated through separate legislation either during the current special session or a subsequent special session of the General Assembly devoted to transportation.

This past Tuesday, the Senate adopted amendments to House Bill 5002, the 2006-08 biennial budget, which will allow the House conferees to begin the journey of reconciling the difference between the two budgets. The actions taken by the Senate to remove the tax increases from the budget and establishing a reserve fund represent the first step in resolving the differences between the two budgets.

Mr. Speaker I know you join me and my fellow conferees in acknowledging this important action taken by the Senate. By approving a substitute to this legislation that adheres to the Constitution of Virginia and the long-standing practices and customs of the Virginia General Assembly, the Senate has removed a major obstacle to completing our work.

Furthermore, by agreeing to establish a reserve fund the House and Senate have agreed in principle on three major points. First, that transportation should be set aside and discussed upon conclusion of the adoption of a new biennial budget. Second, that we should fulfill our commitment made in 2000 to using insurance premium taxes. Third, that the use of surplus general funds is appropriate for transportation projects.

While the general framework of a reserve fund is in place, we still to negotiate two important aspects of the reserve fund. First, is the appropriate dollar amount to be set aside. In total, the Senate budget proposes approximately $570 million in transportation funds versus the roughly $1.0 billion proposed by the House.

Second, while both budgets include language that stipulate that these funds can only be used upon separate action taken during either the current or a subsequent Special Session; the language proposed by the House does not set either an artificial deadline for action or establish an undefined threshold of revenue that would need to be generated for transportation.

Nonetheless, as is true with any item in conference, the exact dollar amount and accompanying language will reflect a compromise that satisfies the objectives sought by both bodies.

Mr. Speaker, it is my hope that we can begin in earnest to reconcile our budgets. While the number of items in dispute may not be great, there are, however, several significant policy differences that remains within our respective budget. While overcoming these differences should prove much less daunting than our earlier task, they will still require a significant investment of our time.

Mr. Speaker, as is customary, I will ask the House to reject the Senate Substitute to HB 5002 so that both chambers can properly exercise its prerogative to insist upon its amendments. This action will enable the reappointment of the conference committee and return our negotiations to their regular status.

That being said Mr. Speaker in an effort to resolve the various matters in public education last Friday the House conferees made several compromise proposals to the Senate conferees. Specifically, the House conferees have agreed to:

1. Move to the Senate’s position for funding the state portion of a 4% teacher pay raise, which would be effective December 1, 2006. In exchange for our adopting this position, Senate conferees would agree to continue the existing pilot on the Hard-to-Staff School Initiative, a program that is now scheduled for evaluations at the end of this year, and begin the process of phasing out the federal revenue deduction cap.

2. Increase by $20 million the amount of Literary Fund money awarded for local school construction. In exchange for our adopting this position, Senate conferees would accede to the House by agreeing to maintain the current Virginia Retirement System rate at the amount included in the budgets introduced by both Governor’s Warner and Kaine.

Although the House compromises on K-12 education were positively received by our Senate counterparts, they have yet to respond to our offer. Obviously, we are disappointed in the inability of the Senate conferees to reach agreement on these substantive matters. If our proposal had been accepted, about 85-90% of the outstanding issues in K-12 education would have been resolved.

Mr. Speaker and Members of the House your budget conferees remain committed to resolving the various matters in a timely manner. To that end we have proposed to meet with the Senate conferees next Tuesday. Now Mr. Speaker I move that we reject the Senate Substitute to House Bill 5002."

April Showers Could Bring May Flowers...and a Budget!

I discovered the most unusual thing about April. Did you know that it is National Humor Month? I didn’t and that got me thinking. Maybe we need a little more humor in our lives. Just look around you…there is more out there that will make you cry than laugh and that is not healthy. News about gas prices due in large part to severe Federal regulations, Amber alerts in Spotsylvania, the War on Terror, illegal aliens, and still no state budget could make anyone depressed. So I decided to start my message for this newsletter with a little levity. Now if you know me well you know I love to laugh but am not the best joke teller. I doubt that I have ever perfected a punch line even. So here goes (and note that the subject matter is pretty easy pickings these days): Johnny said to his friend Billy: "My uncle ran for Senate last year." Billy said: "Really? What does he do now?" Johnny replied: "Nothing. He got elected."

Ok? So now that you have had a good healthy laugh please know that Sen. McDougle did not authorize this message. In all seriousness, the Senator is doing a great job, working hard and holding the line on taxes much like me. I hope that you will take the time to salute him for his efforts. April was a busy month for your legislator as the Special Session continued on and the budget remains a captive to those who desire to raise taxes and justify doing so by claiming a resolution to the transportation issue. Now we can all agree that that is wrong and intellectually dishonest. Transportation can be addressed much like the state’s other core service areas but it will be an important subject for the next twenty years if not longer. Do we ever claim to “fix” health care or “solve” mental health? Clearly, no. Still each budget cycle we look again at how we can do more and this is what we have done with transportation. The House plan does not raise your taxes but it does put about $500 million new dollars to transportation needs across the state over the next four years. If you believe that we are doing the right and responsible thing to hold the line while funding the other core services of government then remain patient. It is my hope and prayer that by next month’s newsletter an agreement will be reached.

Hanover School Board Measure Passes: Delegate Peace Instrumental in Successful Amendment

Mechanicsville, VA - In today’s reconvened session of the Virginia General Assembly, an important measure was advanced benefiting the Hanover County School Board. In recognition of their leadership, the House approved an amendment to HB 466 by the Governor allowing for a salary increase for school board members from $4,600 to $8,000, amounting for the board’s first increase in ten years. The increase shall become effective on January 1, 2007.

“With our great schools, the Hanover School Board should be commended for their pursuit of excellence and positive outcomes,” remarked Delegate Peace. “A salary increase is likely an overdue acknowledgement of the personal commitment our board members make to maintain our high standards and meet the educational needs of our community’s most vital asset, our children.”

Due to language in Virginia Code §22.1.32 which requires that school board salary increases be enacted only in a year in which 40% or more of the school board’s members are to be appointed, the county would not have been able to enact the approved salary increase as the bill was originally introduced.

The Hanover County School Board is comprised of seven members who serve staggered terms of four years. As a result, no more than two members (28%) are ever appointed in any given year. In other words, Hanover never meets the 40% requirement to enact a salary increase.

To overcome this statutory obstacle and to enable the Hanover County School Board to enact the salary increase approved by the General Assembly, Delegate Christopher K. Peace (R-Mechanicsville) asked Governor Timothy M. Kaine to offer an amendment to House Bill 466.

The Governor’s amendment allows school boards to establish a salary increase prior to July 1, 2006, if such county school board has seven members who are appointed for staggered terms; the seven member school board has not received a salary increase for ten years; and at least one member of such appointed county school board is appointed in 2006.

Hanover was the first Virginia school district to receive the United States Senate Productivity and Quality Award for Continuing Excellence. Additionally, for the fourth year in a row, 100% of Hanover schools have earned full accreditation according to the Virginia Standards of Learning. The drop out rate in Hanover schools is less than 1% and 99.8% of teachers are “highly qualified” as defined in the federal No Child Left Behind Act.

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