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Additionally, the Democratic governor will recommend an estimated $15 million to increase long sought-after enhanced retirement benefits for state policemen.

For example, a 30-year veteran of the state police would receive about 55.5 percent of his final salary annually. That is an increase from the roughly 51 percent currently received, one source estimated.

Additionally, the governor will offer, among other things, cash to localities that already award enhanced benefits to retired deputies. About 60 percent of localities offer the benefits and the state cash would help defray their costs.

Kaine's proposed changes to the state budget also will set aside about $175 million for capital projects around the state, much of it to deal with cost overruns of construction in higher education and some in mental-health facilities.

He also would add about $60 million to plug a shortage in health care to pay for current Medicaid services buffeted by a slowdown in tobacco payments. Medicaid primarily serves the poor, disabled and elderly.

The source also estimated that the governor proposed spending about $15 million on homeland security, primarily on allocations to local programs.

Kaine will detail his major spending changes to the second-year budget spending in an appearance this morning before the money committees of the General Assembly. With a humming economy producing millions of dollars over estimates, Kaine will not propose tax increases for government services in his proposed amendments.

Kaine left less than $10 million unearmarked for spending in the budget. The governor had held several events this past week to highlight major budget initiatives. They included 3 percent raises for public school teachers and $250 million in borrowing to upgrade sewage-treatment plants to improve the polluted Chesapeake Bay.

Legislators approved the state's $74 billion, two-year budget just before the July 1, 2006, deadline after marathon wrangling over transportation. After 246 days of fighting, the House and Senate failed to agree on a package of tax and fee increases, sought by Kaine and the Senate, to produce an extra $1 billion annually for road, rail and transit improvements.

The confrontation with the anti-tax House may be replayed during the 46-day session that begins Jan. 10. All 140 Senate and House seats are up for election in November when voters will determine whether Republicans maintain their majorities in the House and Senate.

Kaine said yesterday that he will introduce legislation early in the session to spell out the need for long-term, sustainable revenues for transportation. That may translate into a proposed batch of tax and fee boosts.

His $100 million borrowing proposal will pay for construction of a planned 1,024-bed state prison in Grayson County and will generate more than 350 jobs. The prison, to be located in the Mount Rogers Planning District, will be the fourth state prison built in Southwest Virginia in the past decade. Red Onion and Wallens Ridge prisons opened in the late 1990s. A third prison is being constructed in Tazewell County and is scheduled to open in September.

BUDGET HIGHLIGHTS
Gov. Timothy M. Kaine will propose several budget changes when he addresses members of the state Senate and House today. They include:

€ $100 million in borrowing for a medium-security prison in Grayson County

€ $79.5 million for K-12 education, including $64 million for teacher raises

€ $250 million for sewage treatment plants $60 million for Medicaid

€ $161 million for transportation

€ $175 million for construction cost overruns on existing building projects around the state

€ $15 million to increase retirement benefits for state police

€ $15 million for homeland security

€ $10 million remains unallocated

TRANSPORTATION PLAN
This is how Gov. Timothy M. Kaine wants to spend $500 million in one-time transportation investments during the next two years:

€ $305 million to support the Capital Beltway high-occupancy toll-lanes project, the Hillsville Bypass on U.S. 58, the Interstate 64-264 interchange in South Hampton Roads, and widening U.S. 50 in Fairfax and Loudoun counties

€ $125 million for rail improvements along Interstate 95 and Interstate 81 corridors, for railcars for the Washington Metro, Virginia Railway Express and the proposed Norfolk light-rail system, and for public transit system buses

€ $50 million to complete the state Route 164 rail relocation in South Hampton Roads and begin detailed planning for the Craney Island marine terminal

€ $20 million -- split equally between Hampton Roads and Northern Virginia
-- for technology innovation grants to reduce congestion in the state's most traffic-clogged regions

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