Cigarette-tax increase, K-12 cuts get budget deliberations going
A proposed increase in the cigarette tax and $400 million in cuts to K-12 education are among the strategies being proposed by Gov. Tim Kaine for dealing with the state’s $2.9 billion budget shortfall.
“While Virginia’s economy is still stronger than the nation’s economy as a whole, we are definitely feeling the effects of the national downturn,” the Democrat said in a speech to members of the House Appropriations Committee and Senate Finance Committee this morning in which he detailed his proposals for dealing with the impact of the downturn, which is projected, Kaine said, to run at least into the fourth quarter of 2009, on the state budget.
The cigarette-tax increase and the proposed cuts to K-12 education funding are both sure to raise some controversy with the ’09 state elections providing the backdrop for the budget deliberations. Kaine is selling the cigarette-tax increase as an approach for “avoid(ing) even deeper cuts to our lean Medicaid program,” pointing to the costs that cigarette smoking brings to bear on the state’s Medicaid program at $400 million a year.”
“Virginia’s current cigarette tax only raises $167 million per year to cover these Medicaid costs. In other words, Virginians have to pay another $233 million a year in taxes just to support Medicaid costs related to smoking. I believe that the taxes on smoking should pay for the budget costs incurred because of smoking,” said Kaine, who estimates that the proposed 30-cents-a-pack increase will generate an additional $148 million annually for the Health Care Fund that supports Medicaid. “This still will not fully cover smoking’s costs, but the taxpayer subsidy will be significantly reduced,” said Kaine, noting that the tax even with the sharp increase would still leave the Virginia cigarette tax at about half the national average.
“The increase need not stretch Virginia families, as it is targeted to a specific, non-essential product. And it may, in fact, reduce our health-care costs by encouraging some smokers to quit. That, in and of itself, would be a very good thing,” Kaine said.
In K-12 education, Kaine is proposing that the state allow public schools in the Commonwealth to finish out the academic year without having to endure adjustments to their budgets. “The one area that has been held completely harmless in the first three rounds of expense cuts has been K-12 education. In fact, as we were cutting most state programs in the biennial budget passed last March, we increased funding for public education by approximately $1 billion for the biennium in accord with the normal re-benchmarking process. But, the revenue reductions necessary for 2010 are big enough that we cannot ignore the single largest state expenditure in this budget,” said Kaine, whose chief moneysaving recommendation for the ’09-’10 fiscal year is a proposed $340 million adjustment in the way the state funds educational-support positions, capping state spending toward support staff at one state-funded position for every 4.03 instructional positions, a ratio based, he said, on a three-year linear weighted average of prevailing practices in school divisions in Virginia.
“Support positions are very important, but there is no reason that we should not set a reasonable staffing ratio for these positions, just as we currently use for teachers and other instructional personnel,” Kaine said. “In fact, the absence of any such ratio ensures that the support costs in educational budgets will continue to grow at an escalated rate. That trend will jeopardize needed instructional investments such as efforts to move Virginia teacher salaries nearer the national average,” said Kaine, who also is pushing a $27.5 million budget adjustment in the form of eliminating state general support for school-construction grants and a $55 million adjustment in redirecting Lottery Funds currently going to school construction to cover base operational expenses.
Kaine concluded his speech to the money committees with a bit of a pep talk. “We are well-positioned to come out of this recession quicker and better than many other states. Our fellow Virginians will thrive in a refreshed economy that will be built on new technologies, green jobs and global trade. Our state government will also be leaner and better equipped to make the most productive use of our tax dollars possible,” Kaine said. “And it’s not just about the tools we have. It’s also about character. Adversity reveals character. Our citizens will be watching us this session to see how their leaders handle things. They expect problem-solvers, innovators and visionaries. If we act in a mature and sensible way, making decisions that are smart and farsighted, working together for the common good, we can be part of the effort needed in this nation to begin a lift in public confidence.”
The first response from Republicans was a partisan-tinged attack from attack-dog Republican Party of Virginia chair Jeffrey Frederick that raised issue with the budget forecasting done by Kaine and former Finance Secretary Jody Wagner, a candidate for the Democratic Party lieutenant-governor nomination. “For years, Republicans warned Governor Kaine, Secretary Jody Wagner and others in the administration that the revenue forecasts they used to justify their addiction to higher spending and bigger state government were irresponsible and reckless,” said Frederick.
“Unfortunately the governor’s book-cooking and fuzzy math is now having a real and tangible impact on the citizens of Virginia. The administration has failed their accounting test, and now they turn to their regular knee-jerk solution for all that challenges government – higher taxes. Raising taxes in this period of economic uncertainty with unemployment numbers growing is exactly the wrong thing to do,” Frederick said.
- Story by Chris Graham
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House Speaker William J. Howell (R-Stafford) and House Appropriations Committee Chairman Lacey E. Putney (I-Bedford) today commented on Gov. Kaine’s budget message to the House Appropriations and Finance Committees and the Senate Finance Committee.
“With today’s proposal, Governor Kaine has informed the General Assembly of where he believes Virginia’s budget should be cut and indicated his spending priorities to balance the $76 billion state budget,” remarked Chairman Putney. “Now, the task falls to the General Assembly to carefully and thoughtfully review his proposals, making adjustments that we believe may be needed and are in the best interests of protecting and creating jobs for the benefit of citizens throughout our Commonwealth.
“With a revenue shortfall likely to exceed $3 billion, Virginia’s families and businesses facing difficult times, and uncertainty as to when the economic recession will end and circumstances will improve, lawmakers are facing a daunting challenge. The Governor has proposed a number of strategies to balance the budget, including embedding tax increases in his proposed amendments to the state budget. Tax proposals are properly under the purview of the Finance Committee and, as such, unless they are passed should not be embedded in the budget. Instead, they should stand alone for consideration on their merits by the Finance Committee. Despite these unfortunate obstacles, it is essential and expected by the people of Virginia that we balance the budget as required by the State Constitution and complete our work in the allotted 46-day 2009 General Assembly session. Working as productively and cooperatively as possible, it is the intent and desire of the House to discharge our duties on time.”
“Virginians are facing the most daunting economic environment since at least the Wilder Administration, and the prospects for a quick economic recovery do not look promising,” noted Speaker Howell. “Right now, Virginia’s families and businesses small and large are having to make difficult and painful decisions regarding their own budgets. It falls to us to do the same. As the people we serve are struggling to live within their means and make do with the incomes they earn, they rightfully expect their government to adhere to the same standard. The House will do so.
“This year, the General Assembly is tasked with making adjustments to Virginia’s existing 2008-2010 budget, which took effect July 1, 2008. The House Appropriations Committee has been working diligently for months now to produce practical and long-term solutions to the current revenue shortfall, and to position the Commonwealth’s budget so that this situation will not repeat itself with the frequency it has during this decade. Now, we begin the hard work of constructively reviewing the Governor’s budget cut recommendations, incorporating our solutions, and ultimately adopting amendments to bring overdue structural balance to Virginia’s spending blueprint. The House will meet this challenge, and is fully prepared to amend the existing 2008-2010 state budget without requiring any Virginians to pay more in job-killing taxes during an economic recession.”
Senator R. Creigh Deeds released the following statement today in response to Governor Tim Kaine’s presenation to the Senate Finance and House Appropriations Committees:
“At a time when Virginia’s working families are struggling and our nation is facing the worst economic crisis since the Great Depression, Governor Kaine needs all of us–Democrats and Republicans, senators and delegates–to rise to the challenge. Only by working together can we get our economy back on track and create the jobs of the 21st century that will provide real relief for the middle class.
“Virginians elected us to serve as public servants, not partisans. Now is not the time to put politics first and the people who elected us second; now is the time to balance the budget and get the state’s economic engine running at full speed again.
“I’m ready to get to work with the Governor and the leaders of both parties to begin the task of solving these problems now. Time is of the essence and we can’t afford to waste a moment. Every day without consensus is a day of uncertainty for Virginia families, businesses, and the employers looking to create new jobs in the Commonwealth.”
Attorney General Bob McDonnell issued the following statement today in response to the Governor’s proposed amendments to the 2008-2010 biennial budget.
“We face a very difficult economic climate. The stock and real estate markets have contracted, and most businesses are not making new investments. The unemployment rate is rising, and people are hurting. Most citizens of Virginia have been affected. The budget of the Commonwealth has not escaped this downturn. The Commonwealth faces a shortfall of at least $3 billion. This significant deficit requires immediate action. The Governor has outlined a series of proposals. Some are sound and I will support them. Others I do not support.”
“Spending in Richmond has increased significantly. The budget has doubled over the past ten years. With this downturn in the economy comes the opportunity to look for efficiencies in government, and find the best ways to deliver quality government services at a reduced cost to taxpayers. We did this in The Office of the Attorney General. We cut our budget by nearly 15% over the past year. While we are only one small part of the overall government, this does show that spending can be reduced, without hurting the quality of our services.”
“The Governor has called for some significant reductions in spending. This is the proper course of action to address this shortfall, and I applaud this work. I am disappointed however that the Governor has called for a tax increase. You should not raise taxes in a recession, and you cannot tax your way to prosperity. Another huge increase in the cigarette tax would potentially threaten a Virginia industry at a perilous time, while increasing the tax burden on many Virginia citizens and small businesses when they can least afford it.”
“We must work together to guide the Commonwealth through this financial downturn in a responsible manner. By taking the right steps today we can position Virginia to rebound in the economic recovery that will come. This is the time to look at more innovation, prioritization and consolidation to save money. This is the time to revisit every function of government and ask hard questions. Find what works and keep it. Identify what does not and cut it. I urge the Governor and the General Assembly to work together to solve our budgetary deficit in a responsible, and taxpayer friendly, manner.”
Virginians for a Healthy Future responded to Governor Tim Kaine’s proposal today to increase the state’s cigarette tax by 30 cents per pack.
“Governor Kaine has taken a bold and important step today by proposing an increase in Virginia’s cigarette tax. The research is clear that increasing the price of cigarettes through tobacco taxes is one of the most effective ways to reduce youth smoking,” said Keenan Caldwell, Director of Government Relations for the American Cancer Society and one of the Co-Chairs of Virginians for a Healthy Future. “However, the Governor is missing a great opportunity to dramatically improve the health of Virginians children and save taxpayers money. A 30-cent increase will generate some revenue for the state, but it will not have a substantial impact on health. Virginians for a Healthy Future encourages our leaders to raise the cigarette tax by 90 cents per pack to significantly reduce smoking, especially among kids.”
Increased tobacco taxes are especially effective at reducing smoking among kids . Studies show that every 10 percent increase in the price of cigarettes reduces youth smoking by about 7 percent and overall cigarette consumption by about 4 percent. In recent years, every state that has significantly increased its cigarette tax has enjoyed significant increases in revenue even while reducing cigarette sales.
Caldwell says that “Increasing the cigarette tax is a win-win-win solution for Virginia. It is a public health win that will reduce smoking and save lives, a fiscal win that will raise needed revenue and reduce smoking-caused health care costs, and a political win because cigarette taxes have the strong support of the public”.
“When we raise our cigarette tax, let’s do it right,” says David DeBiasi, Director of Advocacy and Public Education for the American Lung Association in Virginia and Co-Chair of Virginians’ for a Healthy Future. “The Governor has an opportunity to get three tremendous wins, all in one General Assembly session. With the overwhelming public support for cigarette taxes, there is no reason to leave money on the table that might cost state employees their jobs.”
According to projections developed by the Campaign for Tobacco Free Kids, a 90-cent increase could prevent 83,400 Virginia kids from becoming smokers; prompt 44,100 adult smokers to quit; and prevent 38,200 adults and kids from premature, smoking-caused deaths. In addition, the Campaign conservatively projects that a 90-cent tax increase would generate $292.9 million in new revenue each year.
Virginia can achieve even greater reductions in smoking and even greater health and financial benefits by dedicating a small portion of the new cigarette tax revenue to tobacco prevention. In a report released last month by the Campaign for Tobacco Free Kids, Virginia is ranked among the bottom in state funding for smoking prevention programs. By increasing the cigarette tax, Virginia can protect its kids from tobacco, save lives and save money. By properly funding tobacco prevention, we can achieve even greater benefits.
“Cigarette tax increases are proven to save lives,” says Cathleen Grzesiek, Director of Government Relations for the American Heart Association and Co-Chair of Virginians for a Healthy Future. “They make cigarettes too expensive for many kids to buy and give smokers another incentive to quit. The higher the tax, the more lives saved. Virginians for a Healthy Future will continue to advocate for a portion of cigarette tax revenues to be dedicated to smoking prevention and cessation. We are eager to see the General Assembly follow through on passing a significant cigarette tax increase in 2009.”
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Virginians for a Healthy Future works to improve the health, education and welfare of children, families and communities by reducing the use of tobacco products in Virginia. The coalition is comprised of many individuals and more than 75 invested community organizations from across the Commonwealth.