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Va. governor offers modest spending hike in budget

Monday - 12/17/2012, 3:47pm  ET

AP Political Writer

RICHMOND, Va. - Gov. Bob McDonnell offered cautious revisions Monday to Virginia's two-year budget, targeting modest spending increases for indigent health care, conditional raises for teachers and a hefty $128 million deposit into the state's rainy day reserves, and emphatically rejecting an expansion of Medicaid for the state.

The amendments he submitted to the General Assembly's budget-writing committees also take Virginia's cash-strapped cities and counties off the hook for a combined $45 million in state support they would be forced to return under the current budget.

Wary of an economic shock that would disproportionately harm Virginia if Congress can't agree on federal deficit reductions and avoid a year-end "fiscal cliff," McDonnell tempers predicted state revenue growth on which spending for core services budgeted through June 2014 is based. The estimate for 4.5 percent growth in fiscal year 2014, which begins July 1, will be decreased to 3.8 percent.

"We face disproportionate risks from downsizing, which as we all know, is both necessary and inevitable," McDonnell told legislators in explaining the 552-page revised budget he presented them.

McDonnell offers 150 midpoint amendments for year two of the budget that prescribe a total of $524 million in agency savings or spending cuts. He made 204 amendments that increase state spending by a total of $735.1 million.

While that's a net increase of $211 million in spending over cuts, it's less than one-fourth of a percentage point in the scope of an $80 billion biennial state spending blueprint.

Nearly $59 million worth of the proposed spending increases would fund the state's share of a 2 percent raise for teachers, librarians, principals and instructional aides _ their first in four years. McDonnell disclosed that proposal last week, tying the appropriation to passing McDonnell's "Educator Fairness Act," which would make it easier for local school districts to fire underperforming and incompetent teachers, a provision the 60,000-member Virginia Education Association is wary of. An additional $15 million McDonnell also seeks as merit pay for teachers is not dependent on passing the EFA.

McDonnell seeks nearly $70 million to hold down health insurance premium rate increases for state employees. Co-payments for emergency room visits would increase from $125 to $150.

He asks for nearly $115 million in increased spending to cover expanded use and inflation for health care services through Medicaid, the federal-state program that covers the needy, disabled, elderly, blind and low-income families with children.

But he was unequivocal in rejecting an expansion of the program in addition to his decision not to establish a state-run health benefits exchange.

"I've staked out my position, and it's no surprise to anybody that I say that I believe it's expensive, it's bureaucratic, it raises taxes and it's inflexible, and now, 2 1/2 years after its passage, many important policy questions still remain unanswered," McDonnell said.

His amendments shift about $48 million from the general fund to transportation by slightly increasing transportation's share of the state retail sales and use tax. McDonnell said he hopes to generate an additional $500 million annually for highway maintenance but didn't discuss details of the package he will introduce before the legislature convenes Jan. 9. He said there will be a funding bill separate from his new budget amendments.

Serious questions await about the legislature's willingness to consider a major highway funding overhaul placed before them with little notice. House Speaker Bill Howell, a fellow Republican, said the remaining year of McDonnell's term may be insufficient to develop a legislative consensus for such large legislation.

"To do something significant, whether it be abolition of parole or K-12 reform or whatever the major issue, you can't just come pop in and say we're going to do it," Howell said after McDonnell's hourlong address to legislators.

"I don't put too much credence in that," McDonnell said of Howell's reluctance. "I think the speaker and I are going to work together. I think he'd like to get something done."

Democrats don't like McDonnell's proposal to divert an increasing share of the sales tax from the general fund into transportation, increasing the highway share from 0.5 cents of the 5-cent sales tax to 0.55 of a cent.

"Typically, the gas tax and federal funds pay for transportation, not funding from schools, from human services, from public safety," said Sen. Janet Howell, D-Fairfax.

McDonnell, however, was adamant.

"I categorically reject any contention that you can't use general fund for transportation. It's simply false," he said. "We've had $450 million in budget surpluses on average three years in a row, so taking an additional $50 million for transportation is imminently doable." He said he would be "insistent that it be part of the plan."

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