McAuliffe out­lines pro­posal to close $1.2B bud­get short­fall

Some out-of-state online re­tail­ers to col­lect sales taxes

The Washington Times Daily - - METRO - BY ALANNA DURKIN RICHER

RICH­MOND | Vir­ginia would force cer­tain out-of-state online re­tail­ers to col­lect sales taxes, and cut state fund­ing for pub­lic uni­ver­si­ties and col­leges by 5 per­cent to help bal­ance the bud­get un­der a pro­posal out­lined Fri­day by Gov. Terry McAuliffe.

Re­cent im­prove­ments in Vir­ginia’s econ­omy have brought the bud­get gap down from an es­ti­mated $1.5 bil­lion this sum­mer to about $1.26 bil­lion, the Demo­crat told a joint ses­sion of the Gen­eral Assem­bly’s money com­mit­tees.

But law­mak­ers will have to find ad­di­tional rev­enue and ap­prove more spend­ing cuts when they re­turn to Rich­mond in Jan­uary.

“The spend­ing plan I am sub­mit­ting for your con­sid­er­a­tion is bal­anced, fis­cally con­ser­va­tive and in-keep­ing with our Com­mon­wealth’s long tra­di­tion of fi­nan­cial pru­dence,” Mr. McAuliffe said. “It closes our rev­enue short­fall while in­vest­ing in strate­gic pri­or­i­ties that will con­trib­ute to our on­go­ing eco­nomic growth.” Here’s a look at the gov­er­nor’s plan and what’s next: ● Gen­er­at­ing rev­enue: Mr. McAuliffe wants to re­quire out-of-state re­tail­ers with fa­cil­i­ties in the state to col­lect taxes from Vir­ginia res­i­dents — a move he says will put $12.56 mil­lion into the state’s gen­eral fund be­gin­ning in fis­cal year 2018. Ama­zon has been col­lect­ing sales taxes in Vir­ginia since 2013 when for­mer Gov. Bob McDonnell struck a deal with the com­pany.

Mr. McAuliffe also is propos­ing to slow the roll­back of a bud­get-bal­anc­ing gim­mick that re­quires some mer­chants to pay early es­ti­mated sales taxes and rec­om­mend­ing a “tax amnesty pro­gram” dur­ing fis­cal year 2018 that would waive penal­ties and some in­ter­est for in­di­vid­u­als and busi­nesses that owe back taxes. Mr. McAuliffe says those two pro­pos­als will bring in more than $107 mil­lion.

● Fund­ing cuts: Vir­ginia’s pub­lic col­leges and uni­ver­si­ties would see a 5 per­cent cut in state fund­ing, which is lower than the 7.5 per­cent re­duc­tion the McAuliffe ad­min­is­tra­tion had warned they might get.

The McAuliffe ad­min­is­tra­tion says money for fi­nan­cial aid won’t be in­cluded in the cuts. Sev­eral state agen­cies would have to slash spend­ing by 7.5 per­cent, but K-12 schools, Vir­ginia State Po­lice, the De­part­ment of Be­hav­ioral Health and De­vel­op­men­tal Ser­vices would be ex­empt, Mr. McAuliffe said.

● New spend­ing: Mr. McAuliffe is propos­ing $31.7 mil­lion in new funds to bol­ster men­tal health care and sub­stance abuse treat­ment. The money will go to­ward pro­vid­ing more peo­ple with same-day men­tal health as­sess­ments and ex­pand­ing a pi­lot project aimed at im­prov­ing men­tal health treat­ment in jails, among other things.

Mr. McAuliffe’s bud­get pro­posal in­cludes a 1.5 per­cent one-time bonus for state work­ers and teach­ers next year. State em­ploy­ees were sup­posed to get a 3 per­cent raise and teach­ers and cer­tain lo­cal work­ers were sup­posed to get a 2 per­cent pay boost un­der the bud­get passed by law­mak­ers last ses­sion, but those plans were scrapped due to the state’s bud­get woes.

● Med­i­caid ex­pan­sion: Mr. McAuliffe’s bud­get plan doesn’t take into ac­count any po­ten­tial sav­ings from a pro­posed ex­pan­sion of Med­i­caid to more low-in­come Vir­gini­ans, as it has in the past.

Mr. McAuliffe’s re­peated at­tempts to ex­pand Med­i­caid have been met with fierce re­sis­tance by Repub­li­cans. He said he left out es­ti­mated sav­ings this time be­cause the pro­gram’s fu­ture is un­cer­tain, but wants the fi­nal bud­get to in­clude lan­guage giv­ing the gov­er­nor au­thor­ity to ex­pand Med­i­caid if Pres­i­dent-Elect Don­ald Trump and other Repub­li­can lead­ers don’t do away with the fed­eral fund­ing.

● Repub­li­can re­ac­tion: Repub­li­can lead­ers said in a state­ment that they will “con­tinue to hold the line against any form of Med­i­caid ex­pan­sion.”

House Ap­pro­pri­a­tions Com­mit­tee Chair­man Chris Jones and Se­nate Ma­jor­ity Leader Thomas Nor­ment told re­porters they like the in­ter­net sales tax idea, but don’t know if one-time bonuses for state em­ploy­ees are the right ap­proach to boost­ing their pay­checks.

Mr. Jones said that while some of Mr. McAuliffe’s pro­pos­als “may sound great,” law­mak­ers won’t de­cide whether to keep or scrap them un­til they see how they fit in the over­all bud­get.

“All the pieces of the puz­zle have to fit,” Mr. Jones said.

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