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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