Virginia politicians face tough negotiations on budget

RICHMOND

Legislators in the Virginia House and Senate produced competing budget proposals Sunday that would pump additional state dollars into education and health care programs but take different approaches to transportation funding and shoring up the state's underfunded pension system.

Neither proposal includes money to reduce the tolls that will be imposed at the Midtown and Downtown tunnels, though there's $1 million for a pilot program to help low-income college students with the cost.

And in a preview of the political tug-of-war that could play out in the coming weeks, Senate Democrats served up a reminder that their votes will be critical to getting a budget passed. While Republicans have working control of the evenly divided Senate, they will need at least one Democratic vote to pass a budget because Lt. Gov. Bill Bolling does not have the authority to cast a tie-breaking vote on spending bills.

All six Democrats on the Senate Finance Committee voted against the budget bill produced by the Republican-controlled panel Sunday. Each chamber will vote on its own budget bill on Thursday, and the two sides will try to reconcile their differences before the General Assembly adjourns March 10.

Unless something changes, there probably won't be a Senate budget, said Senate Minority Leader Richard Saslaw, D-Fairfax County, after the vote. He declined to say what concessions his party wants.

Senate Republicans say they've already been accommodating by removing from the budget bill items that Democrats abhor, such as a proposal to shift some sales tax revenue from the state's general fund into road maintenance.

"I'm disappointed the budget's being used for some purpose other than its normal construction of the document to serve the people of the commonwealth," Senate Finance Chairman Walter Stosch, R-Henrico County, said. "Hopefully, as the week unfolds, we'll be able to get back together again."

The Republican-dominated House Appropriations Committee advanced its budget bill with a unanimous vote.

The two budget bills contain more state spending than the $84.9 billion plan Gov. Bob McDonnell introduced in December to cover the two years beginning July 1. Both committees made schools and health care safety net programs top priorities in their revisions to McDonnell's budget.

But the two plans contain significant differences. The House plan diverts $94.6 million in sales tax revenue from the state's general fund to transportation, fulfilling a McDonnell administration objective.

The politically divided Senate, which is controlled by Republicans, did not include the sales tax shift in its plan. Instead, it has endorsed legislation to link increases in Virginia's 17.5-cent gas tax to inflation in the cost of road construction materials. That approach would bring in an estimated $123.6 million in new revenue by 2018.

"I think everyone in this room knows that we need more money for transportation," said Sen. Emmett Hanger, R-Augusta County. "But we shouldn't be asked to pave more roads or build more bridges at the expense of K-12 education and health care."

McDonnell said both budget plans released Sunday appear to embrace his core objectives, even though they scale back some of the economic development incentives he had sought.

"I proposed that we not raise taxes, and instead that we prioritize existing state dollars to focus on the core functions of government most closely linked to job creation and economic recovery," McDonnell said. "In making their amendments today, the members of both committees have heeded this call, and signaled their clear partnership in what must be a bipartisan effort."

The House and Senate plans reverse cuts McDonnell had proposed to free clinics, community health centers and the Virginia Health Care Foundation. Both budgets also increase Medicaid reimbursements for hospitals and nursing homes to account for inflation. McDonnell's plan froze reimbursements.

"Adequate funding to our hospitals and nursing homes is not only important for the delivery of quality health care to the aged and disabled, but it also recognizes that our health providers are major employers, especially in rural Virginia," said House Appropriations Committee Chairman Lacey Putney, I-Bedford.

The House plan also adds $136 million more than McDonnell had proposed for public schools. About $106 million of that amount would cover inflation adjustments for non-instructional costs such as maintenance and utilities that were not included in McDonnell's budget. The Senate added $165 million more than McDonnell for schools, including $45 million in additional contributions for teacher pensions.

Both budgets include money to fully fund a program to reduce class sizes in grades K-3 and to expand an early reading intervention program.

Those proposals are welcome news, said Robley Jones of the Virginia Education Association. But they don't come close to restoring the $1.6 billion in cuts public education has experienced since 2008, he added.

Both budgets include provisions for a 2 percent pay raise for state workers that would take effect midway through 2013. The Senate budget also would fund a 3 percent bonus for workers in December if there is a revenue surplus. The House budget redirects some financial aid dollars at state colleges to fund a 2 percent raise for college faculty.

Part of the additional spending that lawmakers proposed is paid for with a combination of additional revenue and balance transfers. About $69 million comes from Virginia's share of a national settlement with mortgage bankers.

The Senate budget sets aside nearly $62 million from the settlement in a reserve fund. Up to $50 million of that amount could be used in the upcoming fiscal year to offset a $60 million annual reduction in state aid to localities. The House budget contains $70 million over two years to restore local aid, including $25 million that McDonnell proposed in his budget.

The House plan includes $367 million in additional pension contributions that McDonnell had sought, but it has balked at requiring state workers to dedicate an additional 1 percent of their pay toward the retirement. The Senate plan, unlike the House proposal, does not change benefits for current state and local employees. It phases in full funding of the state's employer contribution rates.

Locally, there's a proposal to use $7.5 million from a state fund created to cushion Virginia from federal defense cuts to acquire buffer plots around Oceana Naval Air Station.

Both plans feature provisions for $28.5 million to cover the state share of a new Veterans Care Center project in Hampton Roads.

On transportation, the Senate wants to direct $57. 3 million in unspent balances toward passenger rail service to the northeast, including the acceleration of daily service from Hampton Roads.

Julian Walker, 804-697-1564, julian.walker@pilotonline.com

Michael Sluss of The Roanoke Times contributed to this report.