By Michael Sluss

Archives Reprint

    RICHMOND - Gov. Mark Warner bounded down the steps of the Capitol on Tuesday evening, hustling from his third-floor office to a ground-floor meeting room to thank Democrats in the House of Delegates for their help in an improbable legislative victory.

    When he reached the second-floor landing just outside the House chamber, Warner spotted Republican Del. Dave Nutter of Christiansburg standing near the doorway. The governor spun on his heels, left his entourage and approached Nutter to shake his hand.

    "Thank you," Warner told Nutter, before charging down the final flight of stairs to join his fellow Democrats.

    The Republican-run House had just passed a sweeping package of tax increases and reductions that will generate $1.36 billion in new revenue over the next two years, ending a 15-week debate that had consumed Warner's attention and exhausted the nerves of legislators in both parties. The legislation, which had already cleared the GOP-controlled Senate, contained many of the provisions Warner demanded when he rolled out his own tax plan in late November.

    The bill's passage was a milestone for Warner, who staked his legacy on revamping the tax code and creating a stable funding structure for basic state services such as public schools, colleges and health care programs. The 52-45 vote capped what Warner described as "a wild ride," which, at times, appeared headed toward a budget impasse and a government shutdown.

    Warner prevailed, thanks to a fragile legislative coalition that included House Republicans such as Nutter, who moved away from his caucus' rigid, tax-resistant stance and joined forces with a group of like-minded delegates eager to end a standoff with the Senate.

    "This issue is about getting a budget and avoiding a calamity of catastrophic proportions," Nutter said shortly after the House vote. "It's a tough vote. Nobody likes to raise taxes, least of all me."

    The passage of tax reform legislation - which was tied to a separate bill capping the state's car tax relief program - could become the crowning achievement of Warner's four-year term. Getting to the finish line was an exercise in coalition-building that required getting legislators to overcome partisan and parochial concerns.

    With much fanfare, Warner in November rolled out a tax reform package that called for a 1-cent-per-dollar increase in the sales tax on goods, a substantial increase in the excise tax on cigarettes and a higher levy on taxable incomes greater than $100,000. The plan also contained tax cuts, but the overall package would generate more than $1 billion in new revenue in the next two-year budget cycle.

    In his Jan. 14 State of the Commonwealth address, Warner challenged lawmakers to produce legislation that would revamp the tax code and produce enough revenue to adequately fund public schools, state colleges, law enforcement and health care programs.

    "Send me a bill that makes our tax system fairer for working Virginians - one that adequately funds education and our core commitments - one that puts Virginia on the path to long-term fiscal stability," Warner said.

    Veteran political analyst Tom Morris said Warner effectively set the tone in that speech for a debate that dominated the General Assembly's 63-day winter session and another six weeks of a special session that has yet to end.

    "I was of the opinion that, in the State of the Commonwealth address, he did a good job of laying out the case for increased revenue and tax fairness," said Morris, the president of Emory & Henry College .

    Morris headed a citizen commission that produced sweeping tax reform recommendations in 2000. He said the legislation heading to Warner's desk addresses many of the problems the panel identified.

    "I think it was very remarkable how much was included in this bill," Morris said.

    Warner never declared any one piece of his plan sacred, refusing to draw lines in the sand before the Republican-run legislature. In the end, lawmakers sent him a bill that lacked many of the provisions in his original plan, such as completing the phaseout of the car tax. But, as Warner noted Friday, "it was a richer plan than I proposed."

    Budget negotiators have not completed work on a spending plan for the next two years, but senior lawmakers said the new revenue will allow them to increase spending on public schools by as much as $1.5 billion. That amount would more than offset a projected shortfall linked to enrollment increases.

    Negotiators expect to complete work on the budget Monday so the full General Assembly can vote on it Thursday.

    Sen. Emmett Hanger, R-Augusta County, called the compromise package "a step in the right direction."

    "I think with what we've done we'll be able to adopt a budget that meets our core responsibilities," said Hanger, who has helped lead two legislative panels on tax reform.

    The path to compromise was strewn with land mines, especially for Republican delegates who became key players in ending the stalemate with the Senate.

    Throughout the winter, House GOP leaders bashed their Senate counterparts and Warner for pushing tax increases as a prescription for the state's budget woes. The Senate's initial budget plan called for $3.9 billion in revenue from new taxes.

    The House ultimately balanced its initial budget with a hastily crafted plan to repeal certain corporate sales tax exemptions. The two sides never came close to reconciling their differences before their regular session ended March 16.

    The gridlock persisted in the special session that began March 17, even after the Senate cut $1.6 billion from its budget by shelving an ambitious transportation funding plan. House GOP leaders remained adamant about blocking general tax increases, but caucus members grew restless as the impasse stretched into April.

    The unrest led to what House Majority Leader Morgan Griffith, R-Salem, described as "a press feeding frenzy on those who didn't want to stay the course." Amid reports that at least a dozen GOP delegates might challenge the caucus' anti-tax stance, House Speaker Bill Howell, R-Stafford County, gave dissident Republicans the go-ahead April 2 to craft the compromise bill (HB 5018) that led to an agreement with the Senate.

    Griffith, who fought doggedly against the Senate plan, considered the compromise to be premature.

    "I think we should have held out for another week or two, because I think we could have saved the people of Virginia about $400 million in tax increases," Griffith said. "If we had held out for another week or two, the Senate would have seen that we were serious, too, and they would have come down."

    But several GOP delegates feared that the House ran the risk of causing a government shutdown, losing the state's perfect bond rating and hurting the party in future elections. Seventeen ultimately voted for the compromise bill.

    "We were really interested in not having the state's creditworthiness called into question," said Del. Preston Bryant, R-Lynchburg, who helped craft the legislation and sell it to key senators.

    Another supporter of the bill, Del. William Fralin, R-Roanoke, noted that the final package also contains tax relief provisions for which lawmakers can take credit. Those include greater income tax exemptions and deductions, and incremental reductions in the sales tax on groceries.

    Morris predicted House Republicans "will not be punished by the voters for delaying," because lawmakers ultimately avoided a government shutdown.

    Some House Republicans who supported the tax package said Warner had little influence on their decision. But delegates in Warner's own party tested the governor's deal-making skills at the eleventh hour by raising concerns about two key pieces of the compromise.

    Northern Virginia Democrats agonized over the proposed cap on car tax reimbursements, because much of that money flows to their region. And delegates from Northern Virginia and far Southwest Virginia disagreed over how new sales tax revenue for schools would be distributed.

    "There were concerns to the point where some were ready to vote no," said Del. Ward Armstrong, D-Henry County.

    Warner huddled with House Democrats less than an hour before their critical floor vote on the omnibus tax bill and urged them to put aside their misgivings and support the legislation.

    "The governor explained that this wasn't a perfect bill and that there were aspects of it he didn't like," Armstrong said.

    But Warner convinced Democrats that this could be the last chance to salvage a compromise, according to Armstrong.

    In the end, 35 of the 36 Democrats in attendance voted for the legislation. All but four later voted for the car-tax reimbursement cap.

    "The governor saved that bill," Armstrong said of the first House vote.

    Warner described the four-hour interval between the two votes as "almost pure agony." Shortly after the House passed the car tax legislation at 9:35 p.m., he released a statement thanking members in both parties "who put their own parochial interests aside to support this plan.

    "The past few weeks have been difficult for all," said Warner, crediting legislators for passing a tax package "that many thought impossible just a few months ago."

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