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Governor to propose 30-cent cigarette tax hike

RICHMOND, Va. (AP) — Gov. Timothy M. Kaine will propose doubling Virginia’s 30 cents-per-pack cigarette tax in a starkly rewritten budget that pares up to 1,500 state jobs, state legislators said Tuesday.
In his Wednesday morning address to the General Assembly’s money committees, Kaine will increase the official estimate of the projected budget shortfall through June 2010 to nearly $3 billion, said two Democratic legislative leaders who spoke anonymously because Kaine had not made his plans public.
In his fourth round of cuts in barely a year, Kaine will propose about $1.7 billion in cuts on top of nearly $2 billion in earlier reductions spanning two state budgets, the legislators said in separate interviews with The Associated Press.
He will cut about $400 million each from state support for health care, primarily Medicaid, and public education from kindergarten to high school during the fiscal year that begins next July 1, said the legislators, whom Kaine briefed in a Tuesday morning conference call.
Kaine will also withdraw nearly $500 million from the state’s ‘‘rainy day’’ cash reserves, the largest single claim on the fund in its history, said Robert Vaughn, director of the House Appropriations Committee staff.
The governor’s budget amendments, the lawmakers said, anticipate about $300 million in new state revenues, and a large share of that would come from the higher tax on cigarettes.
House Speaker William J. Howell said Kaine told him Tuesday of his proposal to double cigarette taxes from 30 cents per pack to 60 cents, making it the second tax increase on cigarettes in five years if it passes. In 2004, Virginia’s legislature approved a tenfold increase of its 2.5-cent cigarette tax, the nation’s lowest at the time.
Howell and U.S. Rep. Eric Cantor, R-Va., condemned the cigarette tax proposal as ‘‘a job killer,’’ contending it would pose a major blow to Philip Morris, which supplies smokers globally with Marlboros and Virginia Slims from its massive cigarette manufacturing complex in Richmond, a few miles from the Capitol.
Virginia’s 30-cent tax is among the nation’s lowest, ranking 47th nationally. Doubling it would move Virginia approximately into a tie for 37th place with Wyoming, seemingly inconsequential to a multinational tobacco giant.
‘‘You may say that there is a national market for cigarettes, but we would be disproportionately affected by this because of jobs,’’ said Cantor, whose district includes the suburban Richmond headquarters of Altria, the corporate parent of Philip Morris.
Howell said states that double their tobacco taxes often see revenues decline. ‘‘People start going across state lines to buy their cigarettes,’’ he said.
‘‘We strongly oppose the governor’s proposal to increase the cigarette excise tax, especially during an economic downturn,’’ said Bill Phelps, a spokesman for Altria Group, parent of Philip Morris.
‘‘We don’t think it makes a lot of sense to fund important government programs with a declining revenue source,’’ he said.
Opposition to the Kaine’s cigarette tax proposal wasn’t the only concern Howell addressed. While he agrees that the state’s shortfall is at least as large as Kaine says, he called the proposed rainy day fund withdrawal chilling. Half a billion dollars would be used just for the current fiscal year, which expires June 30. It doesn’t affect the second half of the two-year budget, Fiscal 2010.
‘‘My concern is what do you do in the second year of the biennium,’’ Howell said.
In a sinking economy, Virginia has seen its general fund revenue collections slide beneath collections a year earlier in the worst sustained downturn since 2002-03.
In October, Kaine reversed the forecast for state operating fund tax collections from 2 percent annual growth to a 4 percent decline. He ordered 567 state employees laid off, cut college funding by at least 5 percent, closed some older prisons and postponed state employee raises to deal with a $2.5 billion government fiscal crisis.
Triage on the state’s hemorrhaging finances was already the dominant issue heading into the legislative session that opens Jan. 14.
———
Associated Press Political Writer Bob Lewis contributed to this report from Washington.

AP-ES-12-16-08 1714EST

Governor to propose 30-cent cigarette tax hike

RICHMOND, Va. (AP) — Gov. Timothy M. Kaine will propose doubling Virginia’s 30 cents-per-pack cigarette tax in a starkly rewritten budget that pares up to 1,500 state jobs, state legislators said Tuesday.
In his Wednesday morning address to the General Assembly’s money committees, Kaine will increase the official estimate of the projected budget shortfall through June 2010 to nearly $3 billion, said two Democratic legislative leaders who spoke anonymously because Kaine had not made his plans public.
In his fourth round of cuts in barely a year, Kaine will propose about $1.7 billion in cuts on top of nearly $2 billion in earlier reductions spanning two state budgets, the legislators said in separate interviews with The Associated Press.
He will cut about $400 million each from state support for health care, primarily Medicaid, and public education from kindergarten to high school during the fiscal year that begins next July 1, said the legislators, whom Kaine briefed in a Tuesday morning conference call.
Kaine will also withdraw nearly $500 million from the state’s ‘‘rainy day’’ cash reserves, the largest single claim on the fund in its history, said Robert Vaughn, director of the House Appropriations Committee staff.
The governor’s budget amendments, the lawmakers said, anticipate about $300 million in new state revenues, and a large share of that would come from the higher tax on cigarettes.
House Speaker William J. Howell said Kaine told him Tuesday of his proposal to double cigarette taxes from 30 cents per pack to 60 cents, making it the second tax increase on cigarettes in five years if it passes. In 2004, Virginia’s legislature approved a tenfold increase of its 2.5-cent cigarette tax, the nation’s lowest at the time.
Howell and U.S. Rep. Eric Cantor, R-Va., condemned the cigarette tax proposal as ‘‘a job killer,’’ contending it would pose a major blow to Philip Morris, which supplies smokers globally with Marlboros and Virginia Slims from its massive cigarette manufacturing complex in Richmond, a few miles from the Capitol.
Virginia’s 30-cent tax is among the nation’s lowest, ranking 47th nationally. Doubling it would move Virginia approximately into a tie for 37th place with Wyoming, seemingly inconsequential to a multinational tobacco giant.
‘‘You may say that there is a national market for cigarettes, but we would be disproportionately affected by this because of jobs,’’ said Cantor, whose district includes the suburban Richmond headquarters of Altria, the corporate parent of Philip Morris.
Howell said states that double their tobacco taxes often see revenues decline. ‘‘People start going across state lines to buy their cigarettes,’’ he said.
‘‘We strongly oppose the governor’s proposal to increase the cigarette excise tax, especially during an economic downturn,’’ said Bill Phelps, a spokesman for Altria Group, parent of Philip Morris.
‘‘We don’t think it makes a lot of sense to fund important government programs with a declining revenue source,’’ he said.
Opposition to the Kaine’s cigarette tax proposal wasn’t the only concern Howell addressed. While he agrees that the state’s shortfall is at least as large as Kaine says, he called the proposed rainy day fund withdrawal chilling. Half a billion dollars would be used just for the current fiscal year, which expires June 30. It doesn’t affect the second half of the two-year budget, Fiscal 2010.
‘‘My concern is what do you do in the second year of the biennium,’’ Howell said.
In a sinking economy, Virginia has seen its general fund revenue collections slide beneath collections a year earlier in the worst sustained downturn since 2002-03.
In October, Kaine reversed the forecast for state operating fund tax collections from 2 percent annual growth to a 4 percent decline. He ordered 567 state employees laid off, cut college funding by at least 5 percent, closed some older prisons and postponed state employee raises to deal with a $2.5 billion government fiscal crisis.
Triage on the state’s hemorrhaging finances was already the dominant issue heading into the legislative session that opens Jan. 14.
———
Associated Press Political Writer Bob Lewis contributed to this report from Washington.

AP-ES-12-16-08 1714EST