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Democratic gubernatorial nominee Terry McAuliffe is sounding alarms that Republican Ken Cuccinelli’s tax cut plan could force a massive layoff of teachers. School divisions across Virginia could be forced to fire over 8,000 teachers to mask up the shortfall, McAuliffe declared in a Sept. 12 posting on his website entitled Virginia Schools in Danger. He has made similar comments on the campaign trail. We wondered if McAuliffe’s statement is accurate. There are slightly more than 100,000 public school teachers in Virginia. McAuliffe is saying his opponent is open to expelling 8 percent of them in favor of cut taxes. In May, Cuccinelli announced a plan to slice the top personal income tax bracket from 5.75 to 5 percent and the corporate income tax rate 6 percent to 4 percent. After they’re fully implemented over four years, the cuts would reduce general fund revenues by $1.4 billion annually. Cuccinelli said he would offset the loss by eliminating tax loopholes and exemptions and limiting the increase in new spending. McAuliffe’s math McAuliffe arrived at his layoff figure by extrapolating numbers in report critical of Cuccinelli’s tax plan by the Virginia Education Association, an organization representing more than 60,000 teachers . The group has endorsed McAuliffe for governor. During this budget year, which began July 1, the state will spend just under 30 percent of its general fund dollars on public schools. About $5.3 billion of the $17.6 billion fund has been appropriated for K-12 education. Cuccinelli’s $1.4 billion tax cut comes to just 8 percent of the current general fund. The VEA assumed that all major programs in the general fund -- mostly education, health and public safety -- would be cut by 8 percent to pay for Cuccinelli’s tax plan. That would come to about a $420 million reduction for education. The average salary and benefits total for a teacher is $64,635, the VEA said, so a $420 million loss would amount to losing support for about 6,530 teachers . McAuliffe posted these findings on Facebook. But McAuliffe’s campaign didn’t stop there. It ran its own numbers with an assumption that education would be cut more than other general fund programs. For example, Medicaid has been taking a growing share of the general fund budget -- 21 percent in fiscal year 2012. Because it’s an entitlement program, it would be very difficult to cut, the campaign says. McAuliffe’s advisers pointed to several other general fund programs that they said are locked in or difficult to cut, such as debt service and money for the judicial and legislative branches. When these programs are taken off the table, the campaign says education comprised 37.5 percent of the remaining general fund. So McAuliffe’s people concluded that Cuccinelli might have to rely on education to pay for 37.5 percent of his $1.4 billion tax cuts. That comes out to $525 million. And when they divided $525 million by the average salary and benefits cost for a teacher, they came up with 8,122 teachers who could be laid off. Problems with McAuliffe’s formula Cuccinelli says he is not contemplating cutting education and has denounced his opponent for making a false and misleading attack. Despite all the assumptions McAuliffe built into his estimate, he ignored Cuccinelli’s important pledge to offset the cost of the tax cut by eliminating some tax loopholes and cap the growth in state spending. McAuliffe’s campaign is cynical about the pledge, accurately noting that Cuccinelli has declined to identify a single loophole he’d be willing to close. Cuccinelli says he would appoint a commission to rank tax exemptions in order of their effectiveness and urge the General Assembly to repeal the worst ones. There may be plenty of slack in Virginia’s loopholes. A report by the Joint Legislative Audit and Review Commission valued the exemptions allowed in 2008 at $12.5 billion. That almost equals the $14.3 billion in general fund taxes the state collected that year. Most of the exemptions were approved for tax policy reasons, such as conforming certain Virginia tax laws to federal codes or weeding out inconsistencies that could lead to double taxation, according to the report. But JLARC also found that about $2.9 billion of the breaks were designed to promote public policies, such as helping the coal industry or encouraging land preservation. Many of these, JLARC said, could be easily eliminated or streamlined without undermining principles of sound tax policy. McAuliffe’s estimate also ignores revenue offsets that would come from Cuccinelli’s policy of capping spending increases to the combined annual rises in Virginia’s rates of inflation and population growth. Last year, the general fund budget grew by 5.8 percent while the combined rates of inflation and population growth expanded by 3.3 percent. Had Cuccinelli’s cap been in effect, the state would have spent about about $415 million less. There’s one last important point that McAuliffe also ignored: Cuccinelli has promised he would abandon his tax cuts if he and the General Assembly cannot agree on a way offset their costs. If I don’t succeed in reining in government growth and if I don’t succeed in getting the exemptions and loopholes identified to pay for the tax cuts, we don’t get the tax cuts, Cuccinelli said during a July 20 debate with McAuliffe. Our ruling McAuliffe says that under Cuccinelli’s tax cut plan, school divisions across Virginia could be force to fire over 8,000 teachers. The claim is based on assumptions that ignore Cuccinelli’s promise to offset the $1.4 billion cost of his tax cut by closing tax loopholes and capping the increase of future spending. Cuccinelli has frustrated many by refusing to name any tax exemptions he would eliminate. But a state auditing commission has said the $12 billion or so in tax breaks given by the state each year is fertile ground to find savings. McAuliffe seeks cover for his statement by saying the layoffs could happen. That overlooks Cuccinelli’s pledge that he’ll abandon the tax cuts if the legislature is unwilling to pay for them by ending loopholes and limiting spending increases. So McAuliffe’s doomsday estimate only works by twisting Cuccinelli’s plan into an unrecognizable shape. We rate his statement False.
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