Lawmakers Moving on Budget Plans that Do Not Include Tax Reform

After yet another day of back and forth between the House and Senate, Speaker Tim Armstead says lawmakers are now close to an agreement on the 2018 budget.

And that agreement could likely come without the passage of any tax reform measures. 

On Tuesday morning, members of the legislative conference committee debating tax reform held a breif meeting to discuss yet another option, took a break, and returned Tuesday afternoon to a make a final decision about what version of the plan they would include in their final report.

But instead, what resulted was a non-decision.

Republican members of the Senate refused to sign the conference committee report because it did not include their hard-fought reduction to the state’s personal income tax—a reform measure the caucus has been pushing since the start of the regular session in February and Gov. Jim Justice has also recently gotten on board with.  

Without a majority of signatures of members of both chambers, that report could not be sent to the Senate and, therefore, not put to a vote.

Credit Perry Bennett / West Virginia Legislative Photography

/

West Virginia Legislative Photography

“Our goal really was to pass transformative tax reform that would avoid a lot of these cuts, or maybe even all of them,” Senate Majority Leader Ryan Ferns, who co-chaired the conference committee, said Tuesday night, “and that’s what we’ve really been working on this whole time up until today.”

“But it became clear today that no compromise was able to be reached between the majorities in the House and the Senate.”

Ferns gave his interview after, by a party-line vote, members of the Senate approved a budget bill.

That budget bill does include a higher level of spending than the bill Justice vetoed in April, but that new revenue wasn’t brought in by making changes to the state’s tax code, like Ferns and his fellow Republicans Senators wanted.

Instead, the $4.225 billion budget was based on something lawmakers don’t control—the governor’s newly released revenue estimate.

The estimate tells lawmakers how much money the Governor’s Office anticipates the state will bring in during the next fiscal year, or, essentially, how much money they have to spend. The adjustment letter dated Tuesday increases previous estimates by some $170 million, inching lawmakers closer to closing a budget gap.

Republican Senators voted Tuesday night to close that remaining gap by cutting nearly $35 million from higher education institutions across the state and another $35 million from Medicaid—money that the federal government matches 3-to-1. 

“These are the revenues that we have available to us,” Ferns said as he defended the cuts on the Senate floor. “We’re spending every single dollar that we anticipate bringing in and so cuts have to be made somewhere. They’re certainly not desired, but spending reductions had to be made somewhere.”

The decision to move a budget without any new revenue was criticized by Senate Democrats, who have largely aligned with members of the House in recent weeks when it comes to tax reform.

Instead of the Senate Republican plan to increase the sales tax in order to drastically reduce the personal income tax, Democrats have backed a slight sales tax increase paired with the end of some tax exemptions to generate more money.

Credit Perry Bennett / West Virginia Legislative Photography

/

West Virginia Legislative Photography

Sen. John Unger said a majority of lawmakers support the conference committee report that contained that exact proposal, but by holding out on signing that report, Senate Republicans were choosing to make cuts that could be avoided.

“Mr. President, it looks like you all didn’t get your way and you just want to take your marbles home and not play anymore and that’s unfortunate because this game is going to hurt a lot of people,” he said in a floor speech before the vote.

The Republican majority in the Senate approved the bill though and shortly after, it was reported to members of the House.

The House read the bill a first time—the first of three necessary readings before it can be put to a final vote in the chamber. What seemed like a surprising move really wasn’t, said House Speaker Tim Armstead, because “the Senate and the House budget are not that far apart.”

Armstead is referring to the budget the House Finance Committee had approved earlier in the day Tuesday. That bill spends about $60 million more than the Senate version and could be put to a vote in the chamber as early as Wednesday.

So, while Armstead said his members would like to avoid the deep cuts to higher education and Medicaid made in the Senate version, it is also possible that after all of the back and forth, lawmakers could approve a budget for 2018 this week that includes no new revenue from a tax reform plan.

The question remains, however, if the governor will actually sign a budget that includes more than $100 million in cuts that aren’t accounted for in his own plan. Justice proposed increasing taxes to avoid significant cuts in any areas, but he has also made it clear — he will not allow the government to shut down to avoid those cuts.

Lawmakers have until June 30 to approve a budget bill— and Justice has until that same day to sign it—to avoid a shutdown.