Ashton Marra, Author at West Virginia Public Broadcasting

Deadline Looming, Lawmakers Still Searching for Tax Reform Compromise

Gov. Jim Justice sat the head of a long table in his conference room Monday afternoon, surrounded by reporters and members of his staff. It’s the same…

"I think it’s incumbent on us all to take action. You know, this business of being down here on the taxpayers’ dime is no good. It’s just no good." – Gov. Jim Justice during a press conference Monday

Gov. Jim Justice sat the head of a long table in his conference room Monday afternoon, surrounded by reporters and members of his staff. It’s the same room that nearly three months ago Justice declared his budget war room, inviting members of the Legislature to join him and his staff each morning to hammer out a deal.

That deal still hasn’t been reached, with less than three weeks until a potential government shutdown. Justice invited reporters into that conference room once again to explain that it was time for lawmakers to take action.

“If we don’t pass this what I fear is just this, that there is going to be some level of carnage. If you don’t pass this, you know, there has to be some level of real hurt.”

“This” is Justice’s revenue bill, his tax reform plan, his route to balancing the budget in 2018. The governor tweaked his proposal once again over the weekend, presenting it to House Speaker Tim Armstead and Senate President Mitch Carmichael Saturday morning, and members of the Democratic caucus in both chambers Monday afternoon.

The proposal largely remains the same as the plan the governor has been pushing since the end of the regular legislative session in April.

It would increase the consume sales tax to 6.35 percent and broaden the base, as they like to say in the House of Delegates. That means getting rid of tax exemptions — imposing the sales tax on things like cell phones, gym memberships, and a number of purchases businesses make in the transportation and communications fields.

House Speaker Tim Armstead gavels in to a floor session June 9, 2017.

The tweaked plan still includes changes to the personal income tax, notably to reduce the rate of taxation by 7 percent on Jan. 1, 2018. Later reductions would kick in when the state meets some set of economic triggers.

But it’s the personal income tax reform proposal that’s caused the most tension between the House, Senate and Governor’s Office. Justice said he wants to ease some of that tension by getting rid of any income tax reduction for West Virginians who make more than $300,000 a year.

“I have stood rock solid, steadfast in my belief wholeheartedly, and that is the wealthy need to pull the rope. They need to pull the rope,” Justice said.

The governor has also embraced some of the House’s previous position on the tax reform plan, including exemptions for military retirement and some Social Security pay, and increasing the standard deduction on personal income taxes from $2,000 to $2,500 for households that make less than $50,000 a year.

But while the plan has been altered slightly, it hasn’t changed enough for some in the House, and Speaker Tim Armstead said the closer lawmakers get to their June 30 deadline, the less support there is in his caucus for the personal income tax changes.

“I think he felt perhaps that that would bring people on board and it may have some, I’m not certain, I don’t know the numbers within the Democratic caucus,” he said. “I don’t think it moved the needle in our caucus.”

During the press conference, Justice urged lawmakers to take action on the new plan the same day, but his plea came just as members of the Senate gaveled out for the day.

Senate President Mitch Carmichael said, much like the governor, he wants to see a resolution as quickly as possible, but it’s up to the House to come up with a final plan.

“I think and it should be widely known that the House has trouble generating 51 votes for any plan,” Carmichael said.

The House has done more than cobble together 51 votes in favor of a revenue plan during this special legislative session, though.

Three weeks ago, the chamber voted 74 to 17 for a proposal negotiated between Democratic and Republican members. That plan included the veterans and Social Security tax exemptions and broadened the sales tax base, but was called a tax increase by Senate Republicans who want tax reform.

Senate Republicans are defining that reform by changes to the personal income tax, even though Armstead said that’s “the closest you’re going to get to tax reform in the House.”

Senate Minority Leader Roman Prezioso looks over a new tax reform proposal in a conference committee meeting on June 12, 2017.

But the governor is still trying to sway Armstead’s members, spending more than an hour with Republican Delegates in a closed-door session Monday afternoon.

Before that meeting, Justice said he is still willing to compromise, but only on things that won’t hurt West Virginians.

“If what we do is allow something to pass which hurts someone to gain politically, that is totally terrible,” Justice said, “and others are capable of doing something that they know is going to hurt somebody in order to gain politically, it’s terrible. There’s no place for that.”

Armstead said he still is not in favor of the tax reform plan based on changing the personal income tax, but if enough members of his chamber—on both sides of aisle—begin to support it, he wouldn’t prevent it from being put to a vote.

Lawmakers negotiating a compromised version of that tax reform plan will continue their work at the Capitol Tuesday.

Legislature Extends Tax Reform Work Through Tuesday

Members of a legislative conference committee will continue their work Monday, trying to come to an agreement over tax reform. The conference committee…

Members of a legislative conference committee will continue their work Monday, trying to come to an agreement over tax reform.

The conference committee was assembled Wednesday and, according to Legislative rules, must finish their work by Saturday, but lawmakers voted to suspend those rules Friday, allowing the committee to meet over the weekend.

They won’t do that though, pushing off their negotiations to Monday in hopes of finding a final agreement by Tuesday.

The committee’s work is focused on a tax reform measure that’s at the center of Gov. Jim Justice’s proposed 2018 budget.

An idea that originally came from Senate Republicans, at its core is a push to increase the consumer sales tax as a tradeoff for a reduced personal income tax.

It’s the economic benchmarks that the state would have to meet to trigger that repeal that Senate President Mitch Carmichael said Friday are causing conflict between committee members.

“That’s really where the issue centers,” he said. “It’s about the triggers, making sure that we protect, be fiscally responsible, make sure we don’t repeat the Kansas model and make sure we have growth in our economy before we trigger these reductions.”

Democratic members of both the House and Senate argued Friday afternoon that it’s not the economic triggers that are holding up a deal on the plan, but the fact that the bill includes a reduction of the personal income tax at all.

The details of the bill will determine how much money lawmakers have to spend in next year’s budget. That budget bill must be approved by June 30 to avoid a government shutdown.

Governor Urges Caution in Final Tax Reform Plan

Gov. Jim Justice took questions from a legislative conference committee Thursday that is working on a compromised version of his tax reform plan, a rare appearance at the statehouse.

The Democratic governor and Republican Senators have been pushing the tax reform initiative as a way to balance the budget for the 2018 fiscal year.

Although the details of the bill have varied widely over the past couple weeks, at the center of the plan is a push to increase the consumer sales tax as a tradeoff for a reduced personal income tax and changes to the coal severance tax.

Thursday morning, Justice appeared before the conference committee working through the final details of that plan and was pushed for an opinion on one area in particular- the economic triggers.

Lawmakers pushed the governor for specific ideas on the circumstances they should define in code that would allow for future income tax rate reductions.

Justice said whether lawmakers want to create triggers that are based on revenue or on job growth, he feels it’s the Legislature’s decision to make, but he did offer some advice.

“Be safe,” he said. “Don’t be unrealistic that they can’t trigger, because we want them to trigger, but be protective of our state and be safe.”

Members of the conference committee will continue their work on the compromised bill Thursday afternoon and Friday morning.

Tax Reform Plan in Final Stages of Negotiations

Legislators have assembled a conference committee to work out the final details of a tax reform bill that has been at the center of budget negotiations at…

Legislators have assembled a conference committee to work out the final details of a tax reform bill that has been at the center of budget negotiations at the statehouse for months.

Lawmakers have spent since the end of the regular session in March formally– and informally– negotiating the tax reform bill that began in the state Senate. The Senate Republican-backed plan largely aims to repeal the personal income tax in exchange for a higher consumer sales tax.

Gov. Jim Justice joined the Senate in support of the initiative on the final night of the regular session, but during the past few weeks has met resistance from Senate Democrats and members of the House.

Wednesday, both chambers voted to send the bill to a formal conference committee to hammer out a final agreement.

“Frankly, it’s not what everybody wants,” Senate President Mitch Carmichael said of the latest version of the plan. “I think that’s the process.”

“Many people will say a good deal is when everybody walks away and no one is particularly happy about it and that’s kind of where we’re at.”

The current plan backed by Gov. Justice includes an increase of the consumer sales tax from 6 to 6.35 percent and gets rid of a number of exemptions. It also restructures the personal income tax brackets and calls for a 7 percent overall reduction in the tax rate in 2018.

Those rates would continue to be reduced in the future according to certain economic triggers—triggers that House Finance Chair Eric Nelson explained to the conference committee will be at the center of their work because they have yet to be determined.

Other areas of focus for the conference committee include the rate for the increased consumer sales tax, which Senate Majority Leader Ryan Ferns said Wednesday could be increased to 6.5 percent in the new deal to ease the concerns of some members.

The final area of contention between lawmakers is whether to charge the sales tax on construction labor—a tax that could generate more than $40 million in additional annual revenue.

The tax reform plan will provide the base for a budget bill that lawmakers must approve by June 30 to avoid a government shutdown.

Audit: OASIS Contractors Paid $24M for Work State Employees Should Have Done

An audit of the WVOASIS system says the state has wasted millions of dollars on consultants for the computer operating system.

The legislative audit was released to lawmakers during an interim committee meeting Tuesday.

OASIS is a computer software system designed to streamline the processes of state government. It has taken more than 7 years to implement.

The audit found the state has paid over $24 million since 2010 in consulting fees for services that state employees were supposed to be trained to perform. The findings show, however, that those trainings have not occurred and some critical functions handled by the system, like payroll, and could not continue without the oversight of contractors.

Auditors say over 76 months, one consultant alone billed a total of $2.5 million to the state, averaging $33,000 a month in payments.

The audit also questions whether a contract with the consulting firm Information Services GRoup, signed in March of 2016, is valid because the oversight board’s meeting minutes do not reflect an authorization of the contract.

The implementation of OASIS was overseen by the governor, treasurer and auditor’s offices.

State Auditor J.B. McCuskey told lawmakers Tuesday many of the issues, including the training of state employees, have already been or are currently being addressed.

State Adds $170M to 2018 Revenue Projection, Relies on Unpassed Bills

State revenue officials have released new income projections for the 2018 fiscal year, but are basing those numbers largely on legislation that has yet to be approved by lawmakers during a special session.

Revenue Secretary Dave Hardy released the updated projections for the 2018 fiscal year Tuesday, increasing previous estimates by nearly $170 million.

Hardy said $40 million of the new revenue is thanks to legislative and executive action taken during the regular session, including ending some transfers of funds to the state’s workers compensation debt or increasing the wholesale price of liquor.

The other $129 million is the result of projected increased economic activity.

That activity is partially due to expected upticks in the coal and natural gas industries, but most of the revenue is estimated to come from the economic impact of the governor’s roads package.

That package includes increasing the wholesale prices of gasoline by 3.5 cents and hiking Division of Motor Vehicle fees to fund new road construction. The bills have not yet been approved by lawmakers during their current special budget session.

The Governor’s Office says if lawmakers choose to also pass a tax reform measure that is largely based on increasing the consumer sales tax and lowering the personal income tax, lawmakers would have an additional $183 million to use in the 2018 fiscal year.

Lawmakers have until June 30 to approve a budget bill to avoid a government shutdown.

Editor’s Note: This story has been updated to clarify the source of new revenue projected for the 2018 fiscal year.