Governor Warner Announces Action on Budget Amendments and Estate Tax

Governor Mark R. Warner today announced his action on the budget and the General Assembly's proposal to repeal the estate tax with these statements to the General Assembly. The Governor offered 67 amendments to the budget and vetoed the estate tax repeal.

Budget (HB 1400)

I approve the general purpose of this bill but am returning it without my approval with the request that the attached 67 amendments be adopted.

At the end of the 2003 session, I expressed my concerns to both House and Senate members about the content of the conference report. My reservation centered on the fact that the budget appeared optimistic in terms of the collection of various revenue items and that some of the spending items were not sufficiently funded. In addition, I objected to the fact that the FY 2004 salary increases provided by the General Assembly were contingent upon a revenue forecast that I was to prepare in the second year.

Since that time, subsequent events -- including the war in Iraq, the increased threat of terrorism in the United States, and evidence that the national economy remains stalled -- have only added to the uncertainty. Therefore, I am returning the bill with amendments. These amendments focus on four basic objectives.

Given the uncertainty facing us, my first objective is to increase the amount of projected revenue which remains unappropriated. The amendments I propose will increase to $16.5 million the amount of projected revenue which is kept unappropriated -- up from the $14.5 million included in the enrolled budget. At this level, the amount proposed would be the largest unappropriated balance in a decade.

Not earmarking every dollar of projected revenue will provide the Commonwealth with more of a safeguard against unanticipated national events, and afford us greater flexibility to meet our responsibility to secure the Virginia homeland. It will also provide a larger cushion should our economy continue to falter or revenues come in below projections.

To that same end, I am submitting a language amendment to authorize allocations from the unappropriated general fund balance to provide for unbudgeted cost increases to state agencies incurred as a result of actions to enhance homeland security and combat terrorism. Current events require this precaution.

My second objective is to recognize the significant ongoing contribution made by our state and state-supported local employees. At a time when we have reduced the number of state employees by almost 6,000, increased work requirements by altering work processes, and enacted the most significant reform agenda in almost a generation, we must recognize that our employees remain the key to making state government work.

For that reason, I am submitting language amendments to eliminate all contingencies against the FY 2004 salary increase for state employees, faculty, public school teachers, constitutional officers and their employees, and other state-supported local employees, such as local social service employees and community services board employees. Our hard-working state employees have gone two years without any pay increases. If we are now going to propose a salary increase for them, then we must be prepared to make that promise a real one.

Therefore, my amendments delete the requirement that the salary increases hinge on a reforecast of revenues. If revenues are not sufficient to keep the budget intact, I will utilize my constitutional authority to act expeditiously to reduce spending elsewhere in the budget -- even if that means that I must call the General Assembly back for a special session.

My third objective is to provide additional funding for spending items included in the enrolled bill but were not sufficiently funded. Foremost, I am recommending additional funding to implement the program for the civil commitment of sexually violent predators. Our legal mandate to provide adequate treatment and security for these individuals, once they are committed, requires that we take no chance with inadequate funding for the program.

I am also offering an amendment to fund the implementation costs of HB 1954 and SB 1058, passed by the 2003 session of the General Assembly. My amendment will enable the Department of Motor Vehicles to establish procedures to ascertain the legal presence for drivers' licenses and identification cards. This initiative is fundamentally linked to homeland security and therefore must be funded. To do so, I propose to set aside for this purpose some of the increased revenue from the additional one-dollar motor vehicle registration fee contained in the enrolled bill.

My budget amendments also address other critical public safety issues. They restore budget reductions in ABC law enforcement so that there are adequate resources to enforce our alcoholic beverage laws and combat underage drinking. My amendments also provide $1.5 million as a first step toward ensuring that our Department of State Police retain experienced troopers, too many of whom we lose to higher paying jobs. We must begin to take action in this budget to deal with this pressing situation.

In addition, my amendments restore essential funding for three programs that have proven effective in improving public safety -- Project Exile, drug courts, and Pre-release and Post Incarceration Service (PAPIS). Under Project Exile, offenders who possess firearms during the commission of a crime are subject to minimum mandatory sentences - providing an increased deterrent to the illegal use of firearms. Drug courts provide an alternative method of dealing with persons guilty of nonviolent drug possession offenses. They have proven to be an impressive and cost-effective option to incarceration for drug offenders.

PAPIS programs provide services to persons prior to their release and to persons recently released from incarceration. Services include counseling, support groups, job search and placement, and substance abuse counseling. PAPIS programs have proven to be effective in providing transitional services to persons prior to their release or recently released from prison or jail, helping to reduce recidivism and ultimately correctional costs.

I am also offering some language amendments to clarify the intended action or correct matters of policy. Included in these amendments are clarification of the tax-related responsibilities of the Department of Taxation and local treasurers and commissioners of the revenue; equitable treatment for the relief of Marvin Lamont Anderson; modifications of the Governor's budget reduction authority; and technical revisions to certain aspects of higher education decentralization.

Finally, I am proposing a limited number of funding amendments to strengthen our economy and assist disadvantaged individuals. Among them are funding for tourism advertising, the Virginia Enterprise Initiative in the Department of Housing and Community Development, and Jobs for Virginia's Graduates.

The resources necessary to support these amendments come from reductions in the internal service fund which supports building operations at the seat of government, savings from a VPBA bond refinancing, savings from delayed openings of new facilities or lower than projected program participation, and a limited amount of unspent balances. I propose no additional fee increases in my budget amendments.

Taken together, my amendments strengthen the basic framework of the enrolled budget. They fund only essential services of the Commonwealth and provide for a more flexible spending plan to address the uncertainty of the times. I ask that you adopt them.

Through this budget and the other actions we must take, it is my hope that we can continue to work together to address the fundamental challenges facing us, as we collectively strive to move Virginia forward.

Repeal of the Estate Tax (SB 1123/HB 2490)

Pursuant to Article V, Section 6, of the Constitution of Virginia, I veto House Bill 2490 and Senate Bill 1123, which would repeal the estate tax in Virginia beginning in Fiscal Year 2005.

As I have said often since last January, Virginia's deep budget shortfall of the past year is due in large part to an irresponsible fiscal policy during the late 1990s. That policy was marked by unchecked growth in spending and the enactment of more than 50 tax cuts and exemptions whose costs could not be sustained over time. Only when the national economy entered a severe recession in 2001 did the true extent of this policy become fully evident.

This repeal continues this irresponsible fiscal policy. Under these bills, an estimated $211 million in tax benefits would be awarded in the next biennium to fewer than 1,000 families in the Commonwealth. In fact, the estates covered under this bill would be worth at least $1.5 million per individual. What is particularly unfair about this tax cut is that is being proposed at the same time that college students are paying higher tuition at our state universities, the poor and mentally ill are facing curtailed social services, and programs that benefit all Virginians - ranging from parks to environmental protection - are under-funded due to our severe fiscal crisis. Moreover, the General Assembly has proposed this course before it has fulfilled its promise to phase out the car tax and the food tax, which impact nearly all Virginia taxpayers.

My concerns over this repeal have only deepened over the past several weeks. The nation is now at war with Iraq, and the cost of this conflict - coupled with Washington's current fiscal policies - make it likely that the federal government will face large budget deficits for the foreseeable future. Even the U.S. Senate has recently cut $100 billion from the proposed federal tax cuts, reflecting a growing need for more fiscal discipline and recognizing the unforeseen costs of the war. These deficits will constrain federal aid for the states and should reinforce the need for a cautious fiscal approach in the Commonwealth, particularly at a time when homeland security costs are mounting on the state and local level.

Virginia should undergo a thorough review and restructuring of its tax code to ensure that it is fair and efficient to reflect our modern economy. Estate tax reform should be a part of that process. And I will work with the legislature to address estate tax reform next year in our continued efforts to ensure a fairer tax code. With the passage of these bills, the General Assembly has isolated the estate tax for action. In my view, this piecemeal approach to tax reform is inappropriate and will undermine our shared, bipartisan desire for a tax code that increases fairness.

Governor of Virginia - Mark R. Warner
Copyright 2003