McDonnell vows to veto tax increases

RICHMOND — Gov. Bob McDonnell bluntly ruled out tax increases on Monday as a solution for Virginia’s $4 billion budget shortfall, promising to target them for vetoes.

Just 53 hours after being sworn in, the new Republican governor braced state employees for deeper job cuts and residents for reduced services as the state struggles with its worst fiscal crisis.

“Some say taxes must be raised, it’s unavoidable. Here’s what I say. I will work with you — Democrats, Republicans and independents. We will meet and negotiate; there will be disagreements, and there will be compromises,” he said.

But if a bill passes with a tax increase, “I will veto it,” he said.

Former Gov. Timothy M. Kaine, a Democrat, in the budget he introduced one month ago, proposed a $2 billion boost in the state income tax, despite warnings from McDonnell and a strengthened anti-tax Republican House majority that it would not pass.

He offered few details, however, of where he would make cuts to the state payroll other than reductions to his own salary and those of his cabinet.

McDonnell also pledged for the first time as governor a promise he made as a candidate: to privatize Virginia’s state-owned liquor stores.

“It is time that we eliminated, consolidated or privatized programs and agencies that do not work or do not fulfill core government functions,” McDonnell said, focusing on selling the state’s Alcoholic Beverage Control stores.

“As I traveled the great commonwealth over the last year, I didn’t run into anybody who thought selling Jack Daniel whiskey or Grey Goose vodka was a core function of government,” McDonnell said.

As a candidate, McDonnell projected $500 million from selling licenses to private vendors to operate the stores, a figure that industry experts question and that Democrats have said is a daydream. He proposes using the revenues largely to jump start highway projects mothballed as transportation revenues ebbed.

But there are areas where McDonnell proposes to spend more.

He said he would reopen the 19 Interstate rest areas ordered closed last summer as part of drastic cost cuts to the Virginia Department of Transportation.

McDonnell proposed doubling, from $10 million to $20 million a year, cash available to his administration to recruit businesses to expand or transfer to Virginia.

He proposed $3.6 million, much of it to be used to air television ads in other states promoting the states beaches, mountains and historical tourist attractions, much as Michigan now pays to air ads in Virginia.

He proposed a tenfold increase in the Motion Picture Opportunity Fund, to $2 million, lamenting that an upcoming major film about 1973 Virginia-bred Triple Crown winner Secretariat was filmed in Kentucky and Louisiana.

He said he wants Virginia to be the first East Coast state to drill for oil and natural gas offshore. He said he wants the state to begin selling underwater leasing rights for drilling by 2011, dedicating one-fifth of the revenue go to renewable energy programs and four-fifths to transportation. Environmentalists say the drilling threatens the ecology of the Atlantic shoreline.

But McDonnell also proposed allowing motorists to drive faster on select rural stretches of highway, boosting the speed limit from 65 mph to 70 mph.

Lynchburg-area legislators said they particularly liked McDonnell’s theme of improving economic opportunities.

Del. Lacey Putney, I-Bedford, who is starting his 49th year as a delegate, said he thought McDonnell’s speech “was very inspiring, in spite of the economic difficulties facing us.”

“ I see a level of cooperation across the aisle between both parties that I haven’t seen for awhile,” Putney said.

Sen. Steve Newman, R-Lynchburg, said McDonnell’s economic plan hit the right note.  “Right now, in tough economic times, the idea of less government, less regulation and economic development is what people will be eager to hear.”

Del. Kathy Byron, R-Campbell County, said job creation “is going to be the keyword this year” in the General Assembly.

“Creating jobs is going to be the only solution that helps get us back on our feet again and getting people back to work,” Byron said. “He totally understands what the business needs are and we look forward to working with him.”

Del. Ben Cline, R-Rockbridge, said he thought the key word was opportunity.  “We look forward to seizing that opportunity and working with the governor in a bipartisan manner with the Senate and getting as much of his agenda accomplished as possible.”

Staff writer Ray Reed contributed.