If you have a second, please read Lt. Governor Bill Bolling’s latest newsletter. It lays out the differences between the Senate and the House budgets, and shows the strength that all 19 Republican Senators are showing in fighting the Democrats tax and spend policies for an expansion of government. This is all you’ll need to read to get a solid grasp on what’s going on in Richmond with our budget.

This week the attention of the General Assembly was focused on the adoption of amendments to the state budget for the current fiscal year and a new state budget for the 2008/2010 biennium.

There are significant differences between the budgets adopted in the Senate and House of Delegates. These differences will have to be reconciled before the end of the legislative session in March. This issue will be discussed in this week’s edition of The Bolling Report.

The Senate has approved a budget that essentially rubber stamps the key provisions of the budget that Governor Kaine introduced in December. The vote was 21-19 with Democrats supporting the budget and Republicans opposing it. This is the first time in recent history that we have seen a party line vote on a budget in the Senate.

In my judgment, the Senate budget is fiscally irresponsible. It totally ignores the fact that Virginia is currently facing a significant economic slowdown and includes millions of dollars in spending for new and expanded government programs. That is a recipe for fiscal disaster.

For example, the Senate budget includes $45M for Governor Kaine’s proposed expansion of pre-K programs in Virginia, $8M to start up a new program requiring the state to pay 1/3 of the cost of health insurance for low income workers and $45M for increased funding for various child services programs.

While these are noble initiatives, I believe that we should not embark on new and expanded government programs when economic growth is uncertain. A more prudent course is to focus on funding the existing responsibilities of state government and look for cost reductions wherever possible.

If this were not bad enough, while the Senate budget includes millions of dollars in spending for new and expanded government programs, it fails to fully meet our financial obligation for a number of existing government programs such as public education and health care.

Of additional concern is the fact that the Senate budget attempts to pay for these new and expanded programs through a series of irresponsible fiscal decisions. For example, the Senate budget:

* Takes $423M from the state’s Rainy Day fund. I do not believe we should be using the Rainy Day fund to pay for new government programs. In addition, this is 1/3 of the existing balance of the Rainy Day fund, which will make it very difficult for us to address any future budget shortfalls through use of the Rainy Day fund.

* Redirects $180M that had been earmarked for transportation to other government programs. We should not be using transportation dollars to fund other government programs. Last year we asked the residents of Northern Virginia and Hampton Roads to pay higher taxes for transportation. Now, we are redirecting transportation dollars to other programs. That is disingenuous at best.

* Includes $2.6B in new state debt which will result in more than $200M a year in new debt service payments. While the projects that will be funded by this debt are worthwhile, I am concerned that we may not be able to support these debt service payments in future years if our economic growth remains sluggish and this much debt will put us very close to exhausting our debt capacity.

* Redirects $65M in lottery money from the Lottery Proceeds Fund to the general fund to subsidize spending on other programs. Lottery money should not be used to fund other government programs. It was intended to be used for public education. I also believe this transfer is unconstitutional for the reasons set forth below.

NOTE: The people of Virginia passed a constitutional amendment in 2000 requiring that all profits from the Virginia lottery be placed in the Lottery Proceeds Fund and used to support public education in Virginia. While this money can be redirected to other government programs, the constitution states that such transfers require a 4/5 vote. Since the Senate budget was only approved on a 21-19 vote, I ruled that the budget failed to pass because it did not receive the required 4/5 vote. Unfortunately, Senate Democrats chose to override that ruling on a 21-19 party line vote, ignoring the constitutional requirement for a 4/5 votes.

* Includes a 5 cent per gallon increase in the state gasoline tax. Beginning July 1, 2008, the gas tax would increase by 1 cent per gallon per year for the next five years generating an additional $250M for highway maintenance. I do not believe it is necessary or appropriate to increase gas taxes at a time when gas prices are already at record highs.

I am pleased to report that Senate Republicans did their best to advance a more fiscally prudent budget alternative. In fact, in an unprecedented move, Senator William Wampler (R-Bristol), the ranking Republican on the Senate Finance Committee, offered an alternative budget for the committee’s consideration.

The budget recommended by Senate Republicans would have taken no money out of the Rainy Day fund; redirected no money from transportation or lottery profits to other government programs; fully funded core responsibilities like education, public safety and health care; and required a 6% across the board reduction for most other state agencies.

Of all the budget alternatives considered this year, the Republican budget offered in the Senate represented the most conservative approach which is in keeping with the economic conditions we face. In tough economic times government should do what families and businesses have to do – we should tighten our belts, prioritize our spending decisions, resist the temptation to embark and new and costly government programs and live within our means.

Clearly, Senate Republicans understand this, but Senate Democrats do not. Senator Wampler’s budget alternative was rejected by the Committee on Finance on a party line vote.

The House of Delegates has approved a more modest budget proposal. While the budget approved by the House of Delegates is not perfect, it is far better than the budget approved by the Senate.

The budget approved by the House of Delegates has scaled back many of the Governor’s proposed spending initiatives, includes a much smaller withdrawal form the state’s rainy day fund ($225M), a more modest bond package ($1.8B), rejects the proposed increase in the gas tax and restores the $180M in transportation dollars that Governor Kaine had proposed using to fund other government programs.

There is one area of new spending where legislators of both parties have reached agreement. Both budgets would increase funding for mental health programs in Virginia by about $42M a year. This additional funding is necessary to implement the recommendations of the Virginia Tech Review Panel and I applaud the members of the General Assembly for embracing these recommendations on a bipartisan basis.

The differences in the budgets approved by the Senate and the House of Delegates will have to be resolved in a Committee of Conference before the end of the legislative session on March 8. Obviously, this will not be an easy task and the budget conferees will have many difficult issues to confront.

While some compromises will be required to reach a final budget agreement, I encourage our Republican budget conferees to stand strong for a conservative approach to the budget.

For additional information on the issues discussed in this week’s edition of The Bolling Report, please visit the following links:

* Bolling, Vogel criticize budget approved by split Senate

* Statement of Lieutenant Governor Bolling On Adoption of Senate Budget

* Statement of Lieutenant Governor Bolling On Budget Ruling To Protect Education Money In Lottery Proceeds Fund