Gov. Tim Kaine and House Speaker Bill Howell are tussling again over the budget, this time over Kaine’s decision to use $3.7 million in surplus state funds to bail out a Fairfax County day care program. As Washington Post reporter Bill Turque explains the background:

For the past several years, Virginia has used state and federal money to subsidize day care for about 6,000 children of single, working parents who had made it off the welfare rolls. When Congress tightened work requirements this year for those still on welfare, the state decided to use its money to help them find child care.

But the actions still left funding uncertain for day care for about 1,900 children. Kaine asked the General Assembly in the spring to use some of the state’s budget surplus to make up the losses. The GOP-led House of Delegates rejected the request.

Kaine justifies the expenditure by calling the situation an “emergency.”

But Howell offers a different version of the story. In a prepared statement yesterday he said: “Despite advance warnings on the sustainability of the federal pass-through funding … the Kaine Administration [did not bring] this issue to the attention of the General Assembly during the regular session.”

Did the House reject a Kaine request for funds, as Turque writes, or did Kaine never raise the issue, as Howell contends? Until presented information to the contrary — and there may be a perfectly valid explanation for the seeming conflict — I’m inclined to believe the Speaker over the reporter.

But there’s a larger issue at stake. Howell brushes up against it when he asks, if Kaine thinks Virginia’s transportation system is so under-funded, why is he using surplus revenues to help out a Fairfax County day care program — something that Virginia’s wealthiest county could easily handle itself? Why isn’t Kaine using the money instead for transportation?

It’s a valid question, but there’s an obvious answer. To Kaine’s way of thinking, everything is underfunded. There isn’t enough money for education, health care and a host of other non-transportation priorities. Heck, Kaine wants to expand statewide pre-school programs at a cost of $300 million a year. That’s why he doesn’t want to divert money from the General Fund to transportation projects.

Here’s how I reverse-engineer the Governor’s legislative strategy coming into the fall: The Governor concluded that he can make a stronger case for raising taxes if the revenues were applied to a clearly dysfunctional transportation system than if they were dedicated to a new social program. That’s why the $1 billion in taxes-for-transportation gambit came first. Once Kaine secured those funds, he would undercut the rationale for using General Fund revenues to fund transportation projects, as Howell wants to do. Then the General Fund would have significant revenues to redeploy in 2009-2010 biennial budget because it wouldn’t include massive one-time investments for transportation, mental health or Chesapeake Bay clean-up like the 2007-2008 budget does. Thus, the pre-school program would be a relatively easy sell — it could be paid for with existing revenue streams. No General Fund tax hikes required.

Unable to get his transportation tax increase this year, and apparently unwilling to try again until 2008, the Governor will have to re-think his options for finding $300 million for his pre-school program. This $3.7 million dust-up over Fairfax County day care looks like the opening move — a reconnoitre of the political battlefield — of Kaine’s next big initiative.