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DANVILLE--Virginia is facing a $2 billion hole in the current two-year budget.
Cutting the car tax by 70 percent will cost nearly half that-- $900 million--in the next two years.
To Sen. Edd Houck, D-Spotsylvania, the cost of cutting the car tax suggests a fairly simple solution to part of the problem: Reinstate part or all of the car tax.
"We really cannot afford to go forward with the car tax at 70 percent," Houck said here yesterday after a Senate Finance Committee budget retreat.
Senators knew that the cost of phasing out the car tax--the state currently pays 70 percent of the tax, and vehicle owners pay the other 30 percent--would be about $128 million more than expected.
Houck says he can't justify spending that much money for tax relief while the state is looking at deep cuts to services.
"That money is not there, and it's competing with other core services," Houck said.
Former Gov. Jim Gilmore was elected in 1997 on a promise to repeal the unpopular car tax. The General Assembly passed a law phasing out the tax over several years, but the law included a caveat: Certain revenue growth levels had to be met for the phase-out to move forward.
During the 2001 session, a Senate majority was convinced that revenue growth requirement hadn't been met, and that the tax phase-out should be frozen at its then-level of 47.5 percent.
Gilmore and the House of Delegates, however, disagreed, and the phase-out moved forward to 70 percent, where it was frozen last year because the state's revenues had bottomed out.
Houck thinks the tax should either be rolled back to 47.5 percent, or reinstated altogether, with the money used to help balance the budget. He plans to introduce either a bill or budget amendments to that effect.
Tax relief "needs to be brought in line with other budget reductions," Houck said. "Education, public safety, mental health, should not suffer further."
Houck said he thinks scaling back the car tax cut would have a minimal impact on individuals.
He uses himself as an example: He has calculated that rolling it back to 47.5 percent would cost him an additional 10 cents a day in tax on his 1995 Mercury.
Houck may be alone on this issue. He said he's had positive feedback in private from some Senate colleagues, but the car tax cut is popular with voters and with the House of Delegates, and legislators are mindful that 2003 is an election year.
Even Sen. John Chichester, R-Stafford--who led the Senate's 2001 opposition to taking the car tax cut to 70 percent--has said he doubts rolling the cut back is a feasible option this year.
The budget problems are expected to dominate the 2003 General Assembly session, which begins in January.
Between lower-than-expected revenues and rising costs for mandated programs such as Medicaid, the state is facing a $2 billion budget gap.
Gov. Mark Warner has already cut $898 million. But that still leaves more than $1 billion for lawmakers to grapple with.
Committee staff at the retreat did not offer specific cuts--Warner has to do that himself on Dec. 20 --but instead outlined how the state spends money in various core areas and whether that spending was mandatory or could be trimmed.
Senators were told they could perhaps save money--or at least save themselves from having to build new prisons in a few years--by looking at alternative sentences for nonviolent offenders.
Because of the state's abolition of parole several years ago and the rising number of nonviolent offenders being incarcerated, there soon will be no room for new prisoners in the state system. The surplus of prison beds--the reason Virginia took in out-of-state prisoners--is gone.
Virginia still has about 1,100 out-of-state inmates in state prisons--mostly from Vermont and Connecticut--but would lose $24 million to $26 million next year if those prisoners were sent back.
Jails in some localities are crowded with inmates who should be in prison, but stay in local jails because of prisons are filled.
Using alternative sentences for nonviolent offenders could ease the jail crunch and the prisons, according to committee staff.
Virginia already has a risk-assessment program to determine if offenders are likely to commit another crime if released. Those who score below 35 on the state's assessment scale have a reconviction rate of just 12.4 percent over three years. Raising that threshold a few points could keep 400 to 500 inmates out of the jail and prison system by putting them instead into cheaper sentencing options, such as "night incarceration centers."
Senators were not cheered by presentations on budget needs in education, corrections, transportation and other areas.
"It just reinforced to me the severe nature" of the problem, Houck said.