WASHINGTON (Map, News) - The legislature’s reliance on projections that personal income taxes will grow by more than $600 million next year to balance its budget has begun to draw fire, with critics calling the assumption overly rosy in the middle of a sharp economic downturn.

The two-year, $77 billion budget approved by the General Assembly Thursday night assumes the tax revenue will grow 6 percent in fiscal 2009 over the current fiscal year’s projections, according to lawmakers and staff. The figure was vetted by both the governor’s top economist and his economic advisers.

But Senate Republicans warned on the floor Thursday that the overall economic slowdown would hit income tax and force the legislature to slash yet more from the already austere spending plan.

The 6 percent figure must be met to maintain a growth rate of about 2 percent, according to Sen. Walter Stosch, R-Henrico, part of the small team of conferees that crafted last week’s budget compromise.

“That is of great concern to us,” Stosch said.

The budget was built to close a $2 billion shortfall through 2010, but the projected deficit worsened throughout the legislative session as it became clear numerous revenue sources would not produce as much as expected. Still, a few modest program expansions are included, including $22 million for Gov. Tim Kaine’s pre-kindergarten initiative and 600 new Medicaid slots for the mentally retarded.

Income tax next year is expected to make up $10.78 billion in revenue, $608 million more than in 2008, said Joel Davison, spokesman for the Virginia Department of Taxation.

“Six percent [growth], given everything that’s going on with the economy, probably can be considered an upper bound,” said Bill Shobe, director of business and economics research at the University of Virginia’s Weldon Cooper Center.

That revenue projection is actually lower than what the budget negotiators wanted to use, said Gordon Hickey, spokesman for Kaine. He said the governor “convinced the conferees that their position and their projections were a little bit high.”

Sen. Edward Houck, D-Spotsylvania, who is also a budget conferee, defended the projection and said he agreed with the conclusion of the governor’s economist and advisers. But Stosch “may be correct,” he said, and income tax projections may prove overly optimistic.

“I think the uncertainty of the economy is on everyone’s mind, we need to monitor and watch it very closely,” Houck said.

wflook@dcexaminer.com

Comments from Examiner Readers

7:42 AM MST on Fri., Mar. 14, 2008 re: "Dulles rail re-bidding stripped from budget"

Lisa Green said:
I've read the State contract with Bechtel for Dulles Rail and I don't see how bidding out this project would be a "breach of Contract" as Sen. Colgan and Governor Kaine assert. This is hogwash that Governor Kaine has put out to stifle real competition. We've got to get him out of Bechtel's pocket already.

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7:41 AM MST on Fri., Mar. 14, 2008 re: "Dulles rail re-bidding stripped from budget"

Examiner Reader said:
Someone should look into Governor Kaine's connections with Bechtel. Something isn't quite right there. Maybe we'll get lucky and find that Kaine was Bechtel's "Client #10"?

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10:55 AM MST on Fri., Mar. 7, 2008 re: "Saslaw pushes tax increase to fill transportation gap after ruling"

Examiner Reader said:
i agree with the person below no excuse for va being so broke oh yea they left one out to va is one of the few states were u have to buy county stickers to just think of all those thousands of people that have to buy them here in va at twenty bucks apeace most other states dont have to buy, them so my question is were is all that money going to would really like to no the answer to that one,so the person below is exactly right theres no excuse for va being so broke,do your job kaine and quit getting off the wall bills passed that waste tax payers money,thats not the job we the people voted you in to do.

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2:22 PM MST on Mon., Feb. 18, 2008 re: "Governor�s plan to cut state aid puts squeeze on local budgets"

Examiner Reader said:
Get rid of the illegal people in N.Virginia, and the drain they have us and get busy taking care of the Americans. There is no excuse for Virginia to be so broke. One of the few states that have total controll of the liguor,beer and wine, one of the few states that you have to pay personal property taxes on your car every year,one of the few states that is a commonwealth. So Mr.Kaine, do your job, get your priorities straight and find out where all the money went.

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