Senate candidates put records as governor on the line

RICHMOND

Should campaign promises be broken?

That's a question that is central to this fall's U.S. Senate race between Republican Jim Gilmore and Democrat Mark Warner, and it stems from when they were back-to-back governors.

Gilmore was elected governor in 1997 on a pledge to end the car tax. He doggedly stuck to the plan despite warnings it was crippling the state budget late in his term when Virginia teetered on the edge of a recession, and he faced rebellion from legislators in his own party.

"It was a sacred commitment," he said.

Warner was elected governor in 2001 after pledging in debates and TV commercials that he would not raise taxes.

In 2004 he ushered a record $1.4 billion tax increase through the General Assembly.

He blamed much of his reversal on Gilmore.

Warner said that after taking office, he was blindsided by a financial mess he inherited from Gilmore that created huge revenue shortfalls and threatened the state's credit rating.

Warner, in effect, says he broke his promise for the good of Virginia.

Both Gilmore and Warner say their race for the Senate is about the future. But they have fought heatedly during this year's campaign over their governorships, saying their contrasting records provide the best insights into their core fiscal beliefs, leadership style and candor.

"The question is who do you trust?" Gilmore asked during a July debate. "Is it a person who sticks with it, delivers on the tax-cut side and does exactly what he says he's going to do? Or is it a person who casually brushes away this kind of fundamental commitment to the people of Virginia and raises taxes anyway?"

"I trust the voters of Virginia to make that choice," Warner replied. Paraphrasing a famous Ronald Reagan line, he asked, "At the end of our terms, which governor made the hard choices and brought the kind of fiscal discipline and management to the state to earn Virginia recognition as the best managed state in the nation?"

Gilmore, the only child of a Richmond meat cutter, has always professed a special affinity for the middle class, which he says is overburdened with taxes and big government. H e graduated from law school at the University of Virginia and worked his way up a Republican machine that dominated suburban Richmond, moving from hard-nosed commonwealth's attorney in Henrico County to election as state attorney general in 1993.

He was handily elected governor in 1997 on a promise to cut the hated car tax. He pledged to wipe out the assessment over five years on the first $20,000 of a privately owned vehicle's value.

The car tax is assessed by local governments, and Gilmore proposed that the state pay back cities, counties and towns for their lost revenue. He estimated during the campaign that the cut, when fully phased in after five years, would cost $620 million annually. When the Virginia Municipal League put the price at $1.4 billion, the Gilmore campaign denounced the nonpartisan group as part of "the big tax lobby in Richmond " and said its numbers were wrong.

It was Gilmore's numbers that turned out to be wrong. In his first week in office, he announced that the cost of the full phase-out would be $1 billion a year. Gilmore said he did not mislead voters and that he was not privy to the best financial information until after his election.

The price tag eventually went up to $1.5 billion, but it didn't seem to matter. Virginia was in the midst of unprecedented economic growth brought on by the dot.com boom. Only nine lawmakers in the 140-member General Assembly voted against the car tax cut.

State revenue grew about 10.5 percent during each of Gilmore's first three years. Gilmore provided money to hire 4,000 new teachers, increased funding to universities to pay for a 20 percent tuition cut and funneled $320 million a year in new money to localities for law enforcement.

Spending rose 42 percent during the Gilmore administration - the fifth highest rate in the nation. Gilmore says the figure is misleading because it includes the cost of car tax relief. Gilmore also cut the food tax and some business taxes.

Problems arose early in 2001, the final full year of Gilmore's term. The tech boom ended and revenue flattened. The car tax phase-out was scheduled for an increase in the state's subsidy from 47.5 percent of the tax bill to 70 percent, raising the total cost to $950 million. To proceed with the tax cut, however, state law required that revenue grow 5 percent.

Gilmore proposed borrowing $460 million to meet the growth threshold that would trigger the tax cut. The Senate would not go along. Gilmore refused to negotiate, saying his vow to end the car tax was "a sacred pledge to voters."

The General Assembly, dominated by Gilmore's fellow Republicans, was unable to reach consensus with the governor. In unprecedented action, the Legislature adjourned in March 2001 without acting on the two-year state budget. Gilmore slashed spending by $420 million and proceeded with the tax cut.

Gilmore has little patience for dissent, little appetite for small talk and was widely criticized for not building personal relations with legislators.

Warner, in contrast, is collaborative, an ultimate salesman. The son of an insurance man, he graduated from Harvard Law School and made a $200 million fortune brokering the sales of cellular telephone franchises.

Gilmore could not seek re-election in November 2001 because Virginia bars its governor from serving successive terms. Warner, who had never held elective office, promised to bring a businessman's approach and bipartisanship to the governorship.

The economy continued to slow that summer, and legislators predicted a $400 million shortfall in revenue needed to balance the budget. Matters worsened after the Sept. 11 terrorist attacks. Reagan National Airport was closed for a month and then ordered to operate on a reduced schedule, eliminating $164 million in anticipated taxes for Virginia.

A month later, Warner made his vow during his election campaign to not raise taxes. In a recent interview, Warner said he thought at the time that the shortfall would be about $700 million. "That's a lot of money, but you can get through that kind of shortfall without raising taxes," he said.

A week after Warner was elected governor in November, Gilmore estimated the shortfall at $890 million. House budget writers predicted it would be $1.2 billion.

In debates this year, Warner has accused Gilmore of trying to hide the problem. When asked to back his claim during a recent interview, however, Warner said, "I don't have any proof of this."

Gilmore called Warner's charge an outrageous falsehood.

Gilmore's last act as governor was proposing a $52 billion, two-year state budget. He balanced it by requiring businesses to prepay certain taxes, by drawing on emergency reserves and by using $653 million in transportation money to pay for general programs such as education, health and public safety. Gilmore also recommended that the final step in the car tax repeal be delayed a year and that spending be cut by $1 billion.

Warner denounced the budget as "filled with gimmicks," a charge he repeats in this fall's campaign.

Warner took office in January 2002 and two weeks later reached a bipartisan agreement with lawmakers to drop "the accounting tricks" in the budget. By then, Warner was estimating the shortfall at $3.2 billion and publicly suggesting that a tax increase might be necessary.

Ultimately, Warner confronted almost $6 billion in shortfalls during his first two years by cutting spending and laying off almost 2,000 state employees. He caused a stir by closing a dozen Department of Motor Vehicles offices and reducing the hours of others.

The nation was in a recession. And while Warner did not blame Gilmore for all of the state's financial woes, he has long maintained that his predecessor's policies exacerbated the problems.

Gilmore says Warner always intended to raise taxes.

By many accounts, Warner's administration started slowly. He suffered a string of small but embarrassing setbacks during his first two years and was criticized by fellow Democrats for being scattershot. He tended to the budget and built personal relations by playing basketball with lawmakers and inviting them to the Executive Mansion for drinks. Urged by many business leaders and educators, he said he planned to "hold a conversation" with voters about raising taxes.

His opening came in late 2003 when Moody's Investor's Service, a major Wall Street bond rating agency, threatened to lower Virginia's top-notch, triple-A credit rating.

Warner offered a $1 billion tax increase that November and held more than 50 town hall meetings, arguing that Virginia could no longer maintain its level of services with its current revenue.

He had solid support in the Republican-led Senate, where the only complaint was that his plan did not go far enough. The Senate approved a $3.8 billion tax increase in early 2004.

There was strong opposition in the House, where GOP leaders chafed at any tax increase. Warner's courting of Republican delegates paid off. He helped persuade 17 GOP lawmakers to break ranks with their leadership and push through a $1.4 billion package. The legislation capped car tax relief at $950 million a year - leaving Virginians with about 70 percent of the cut Gilmore once promised.

One month later, Moody's reaffirmed Virginia's triple-A credit rating, allowing the state to borrow money at the best interest rates.

Virginia's economy, which had been flat for three years, rebounded strongly in early 2004 while the General Assembly was debating the tax increase. Gilmore has repeatedly accused Warner of withholding the good news from the public during deliberations. Warner notes that financial documents containing the specific information Gilmore accuses him of concealing were distributed to legislators and posted on public Web sites.

When the budget year ended June 30, Virginia had a $323 million surplus.

"The whole premise to that increase was that we were encountering fiscal difficulty, and that just wasn't so," Gilmore said during a debate last month.

Warner replied that Gilmore is missing the point. "It wasn't about the short term. It was about putting Virginia back on a long-term path of fiscal stability."

The two chief budget writers in the General Assembly for most of the decade, both Republicans, agree with Warner and have crossed party lines to endorse him this fall. They are former Sen. John Chichester of Stafford and former Del. Vincent Callahan of Fairfax.

Callahan notes that the national economy is sliding again and Virginia is facing a $3 billion budget shortfall this year. He says matters would be worse if Warner hadn't raised taxes.

Gilmore professes amazement that he is criticized for insisting on the car tax cut, which even Warner, at one point, supported.

"Every day, people come up to me and thank me for cutting the car tax," he said. "It was the right thing to do."

Warren Fiske, (804) 697-1565, warren.fiske@pilotonline.com