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Kaine to propose raising taxes, cutting services

Anita Kumar

All the talk on Capitol Square today was about the two-year budget Gov. Tim Kaine will unveil tomorrow morning in front of the General Assembly's money committees.

Kaine's office was expected to brief House and Senate staffers this afternoon but we were told that meeting was abruptly canceled. Kaine did brief Gov.-elect Bob McDonnell behind closed doors at the Patrick Henry Building, but the usually tight-lipped McDonnell crowd revealed nothing to us.

Many legislators (we're assuming mostly Democrats) have spent the last couple weeks talking to Kaine about their priorities for the next couple years, but most contacted today had not seen the final budget language.

Sen. Charles Colgan, chairman of the Senate Finance Committee, said Senate Democrats expect to be briefed tomorrow before the 9:30 a.m. meeting.

Here's what we do know:

Kaine's budget will include tax increases as well as an unspecified number of layoffs and deep cuts to core services, including education and health care, according to sources familiar with the plan.

He will recommend cutting as much as 15 percent of the funding to colleges and universities and $200 million to K-12 education; closing two state mental health facilities; and reducing the state's government contributes to employee retirement plans, said Robert Vaughn, staff director for the House Appropriations Committee.

Legislators and McDonnell, will use the plan as a blueprint but will make changes based on their priorities and the economic forecast.

State officials are bracing for cuts of up to $3.5 billion over two years to accommodate Virginia's ongoing financial crisis.

Sources close to Kaine say he will propose a tax increase -- a move that Republicans, including McDonnell, would likely reject outright -- the only question being on what. The sources asked not to be identified so as not to preempt the announcement.

Kaine has made clear in recent days that he thought the shortfall had become so severe that he would have to make proposals to raise revenue to forestall some cuts to core government services.

Vaughn said that Kaine will propose eliminating the dealer discount, which allows retailers to retain a small part of the sales taxes they collect to cover the costs of administering the tax. The proposal would generate $60 million to $70 million, and it is likely Kaine will propose other, more dramatic, tax increases as well.

One other option would be to reduce the amount the state spends to reimburse local governments for providing car tax relief, which would likely result in an increase in car tax bills. Additional options include an increase in the cigarette or income taxes.

Check back tomorrow for continuing coverage.

By Anita Kumar  |  December 17, 2009; 7:33 PM ET
Categories:  Anita Kumar , Robert F. McDonnell , Timothy M. Kaine  
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