HOUSE APPROVES LONG-AWAITED STATE BUDGET

By Michael Sluss
Roanoke Times

RICHMOND -- The House of Delegates put its final stamp of approval on a new state budget Tuesday, sending Gov. Tim Kaine a document that is as noteworthy for its tardiness as it is for its record spending.

But passage of the long-awaited budget took a back seat to a spirited floor fight over a separate piece of legislation that would scale back a tax credit program designed to encourage land conservation.

The House passed legislation (HB 5019) that would couple a repeal of the tax on estates worth $2 million or more with the shrinking of a land preservation tax credit program. The Senate passed an identical bill (SB 5019) Monday, ratifying tax code changes that House and Senate budget negotiators had agreed to last week.

The tax bill would repeal the estate tax for deaths that occur on or after July 1, 2007. To help pay for the repeal, lawmakers also approved changes to contain the cost of the state's land preservation tax credit program.

Under legislation that has passed both houses, the state would cap annual credits for conservation easements at $50 million in 2007 and $75 million each year afterward. Credits registered above the cap in one year become the first to be eligible the following year. About $325 million in credits have been registered since the program's inception in 2000 and about $211 million worth have yet to be redeemed, according to the Senate Finance Committee.

The legislation also would reduce the tax credit from 50 percent to 40 percent of fair market value of an easement and would put a ceiling of $750,000 on credits awarded for land outside of the Chesapeake Bay watershed.

Del. Jim Shuler, D-Blacksburg, said the legislation would relegate Southwest Virginia to "second fiddle" status when it comes to protecting land from development. Shuler proposed an amendment to lift the $750,000 ceiling, arguing that it would put his region at a "distinct disadvantage."

"I can see it on the wall loud and clear right now," Shuler said. "The high rollers, the bigger rollers from other parts of the state are going to use up everything before we ever get a chance."

The House defeated Shuler's amendment by a 49-39 vote. The House later passed the bill by a vote of 63-25.

Some House Republicans said they reluctantly supported the changes to the conservation program because it was part of a fragile, hard-fought budget compromise with the Senate.

"Is this so important that we put it ahead of the rest of the budget?" asked Del. Bobby Orrock, R-Spottsylvania County. "I feel that this is a battle that needs to be fought, but on another day."

House Majority Leader Morgan Griffith, R-Salem, said he would support an amendment similar to Shuler's if Kaine proposes it. Kaine will not get the tax bills until each house acts on the opposite chamber's legislation. That should happen when the General Assembly reconvenes June 28.

Kaine aides said the governor won't take a position on the tax legislation until he has a chance to review it. But the legislation seems to pit two of the governor's priorities against each other. Kaine has long supported a repeal of the estate tax, saying it would benefit family farms and small businesses. He also has set a goal of protecting 400,000 acres from development before his term expires in 2010.

The tax debate followed House passage of a long-awaited, two-year budget worth more than $72 billion. The Senate passed it Monday. The new budget will take effect July 1, after lawmakers act on any changes or line-item vetoes from the governor.

House Republicans congratulated themselves in a news conference following Tuesday's floor session and blamed Kaine and the Senate for the unprecedented delay in passing the budget. The House rejected efforts by Kaine and the Senate to increase taxes for transportation improvements, and a long-running fight over the issue held up budget talks far beyond the General Assembly's March 11 adjournment.

"There is no doubt in my mind that we would have passed a budget during the regular session had Governor Kaine kept his promise not to raise taxes," said Griffith, who presided over Tuesday's House session while Speaker Bill Howell, R-Stafford County, recovers from recent knee surgery.

A Kaine spokesman declined to respond to Griffith's remarks. But Del. Ward Armstrong, D-Henry County, said lawmakers had little reason to celebrate after missing their budget deadline by 312 months.

"If I write a great term paper and turn it in 102 days late, I'm still getting a 'D' or an 'F' " Armstrong said.