Budget negotiators back state-employee pay raises; 11 conferees, however, remain bogged down over tax-relief proposals

BY MICHAEL HARDY AND JEFF E. SCHAPIRO
TIMES-DISPATCH

Inching toward a new Virginia budget, legislative negotiators are backing a 4 percent pay raise this year for most state employees and an additional 3 percent in 2007.

Eleven conferees -- six from the House of Delegates, five from the Virginia Senate -- were back at work yesterday, slogging through the pricey details of a $74 billion budget for 2006-08 and nearing an end to the marathon impasse over taxes and spending.

"I think we're making some progress," said Senate Finance Committee Chairman John H. Chichester, R-Northumberland.

"Things are going well," added Del. M. Kirkland Cox, R-Colonial Heights.

Hoping to wrap up by week's end, negotiators remained bogged down over tax-relief proposals, including repeal of the estate tax and credits for Virginians who pledge not to develop open land.

Public-employee pay raises would pump millions of dollars into the Richmond-area economy. State government is the largest public employer in the region with a payroll of at least 25,000. The typical state worker is paid about $35,000.

There are about 100,000 Virginia government employees in the state.

Under the plan fashioned by budget negotiators, the pay packets of classified workers -- the nonpolitical, civil-service-type employees -- would increase 4 percent on Nov. 25.

They would be eligible for 3 percent next year, though the General Assembly could tamper with raises during the regular legislative session that begins in January.

Four percent raises are proposed in the first year of the two-year budget for college professors and local employees of state-required offices, including sheriff's deputies and those who work for social-service agencies.

The 4 percent raises track those recommended for teachers and informally endorsed earlier by the conferees. To qualify for cash from Richmond, localities would have to match the state funds for teacher pay raises.

Worried that two tax breaks could drain millions from state and local treasuries, the Senate has proposed coupling abolition of the estate tax with a $70 million limit on conservation tax credits.

But the House is balking -- again pitting Speaker William J. Howell, R-Stafford, against his regional rival, Chichester.

Howell, who opposes the cap, has an unlikely ally: Gov. Timothy M. Kaine. The Democrat has sternly criticized Howell for resisting new taxes for transportation -- the issue that triggered the budget standoff.

The two-year budget that could be on the House and Senate floors soon will not include a long-term solution for financing highways and mass transit.

That will be the focus of a resumed special session of the assembly, one that could begin shortly or might be put off until the fall in hopes House and Senate leaders can reach an consensus in the interim.

The Senate, backed by Kaine, insists higher taxes are necessary. The House favors using a chunk of the $1.4 billion surplus and issuing bonds that taxpayers would repay with interest.

As a start, the House is offering to set aside roughly $600 million for transportation. The Senate, however, is insisting on more.

Also complicating the budget conference: a disagreement over additional staff for Attorney General Bob McDonnell, a Republican and likely candidate for governor in 2009.

The House is recommending more than 40 new employees, many of them lawyers; the Senate, fewer than 20. The attorney general's payroll is currently about 220.

McDonnell is at the center of the latest twist in the budget controversy.

In an official opinion last week, McDonnell argued that Kaine is virtually powerless to run the state if the assembly fails to adopt a budget by June 30, when the current one expires.

Kaine disagrees.