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State Budget: Santa and Grinch

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Given his druthers, Gov. Tim Kaine would not have cast himself in the role of the Grinch Who Stole Christmas. But circumstances have forced him into it. Virginia's budget faces another huge shortfall, and there are only two ways to close it: spend less or hike taxes. Kaine proposes doing both.

His plan calls for trimming the state work force by another 1,900 positions, nearly 700 of them through layoffs. He would reduce contributions to employee pension funds, a move many private-sector companies made some time ago. Virginia's move in that direction is more dubious, owing to a deal made some time back in which higher contributions to the state employee pension plan substituted for pay hikes. Hunting around for cash, the state essentially kicked its obligations to employees down the road. Now it's kicking the can down the road again.

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Kaine also would scrap the state's car tax entirely and replace it with a 1 percent income-tax surcharge. This, too, is problematic. The car-tax cut was a hugely popular reform that propelled Jim Gilmore into the Executive Mansion. Yet as Kaine noted in his address to state lawmakers, it is a Rube Goldberg contraption in which state tax revenues reimburse localities for the money they lose by not taxing the full value of personal property -- which means the car-tax cut qualifies as a state expenditure that needs tax revenue to keep it going. (All clear?)

Netted out, Kaine's proposal amounts to a billion-dollar tax hike. Gov.-elect Bob McDonnell flatly opposes raising taxes. Given the inexorable math, though, the money is going to have to come from somewhere.

There is a third, faint option: hope. State revenue lags economic swings. If the economy bounces back more energetically than expected, then McDonnell might not have to make the brutal choices that have confronted Kaine. It's a slim chance -- but perhaps enough to have McDonnell praying that the New York Sun's editor, Francis Church, was right when he wrote, "Yes, Virginia, there is a Santa Claus."

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