In a surprise move, Gov. Jim Justice increased the state revenue estimate Wednesday by $850 million.
Late Wednesday afternoon, the House Finance Committee advanced a $4.6 billion general revenue budget. The Senate passed its version of the budget bill on Saturday.
In a surprise move, Gov. Jim Justice increased the state revenue estimate Wednesday by $850 million.
House Finance Committee Chair Vernon Criss, R-Wood, said figuring in the additional money for the coming fiscal year revenue estimates, comes as an executive prerogative.
“The legislature is given those dollars by the governor on how much money you’re allowed to spend or put in the budget,” Criss said. “He allowed that he added an additional $850 million in a letter yesterday to allow us to see if we need to use those monies for the things that we’ve all talked about doing for years, and we’re trying to press those out.”
House Finance Committee member John Williams, D-Monongalia, wondered where the governor found the money.
“I don’t know, that’s a heck of a couch cushion,” Williams said. “I asked that question myself in finance to see if there was anybody from the governor’s office that could answer that question. I’m eager to find the answer to that myself.”
Criss and Williams agreed the budget challenge now is to reconcile the revenues expected to come in, with the many state expenditures both mandates and proposed.
“You’re trying to backfill the needs, like we did with the colleges and the CTC’s, setting aside $100 plus million dollars for them, trying to take care of the other necessary items that have been neglected for some time,” Criss said. “We’re trying to catch up with those, as well as keeping a budget for the taxpayers at a minimum cost of raising the budget.”
For Williams, the issue was reconciling the revenue and expenditures.
“This year is a little different in that we have this massive tax cut bill, it’s going to blow a billion dollars into the budget,” Williams said. “That’s before you count some other bills that this legislature has passed and it’s going to knock some holes in the budget. Quite frankly, I’m concerned about our state’s ability to balance, perhaps this budget, but certainly looking at future years, what that’s going to look like?”
The House and Senate have a little more than a week to find that budget balance.
The West Virginia House of Delegates has killed a bill that leadership says was one of the keys to balancing the 2018 budget. The bill was presented on behalf of Governor Jim Justice and originally would have raised $450 million in new taxes but drastically changed as it worked through the committee process.
House Bill 2816 would have put about $20 million dollars back into the general revenue fund during the 2018 fiscal year. The governor’s office says the budget hole for 2018 could be as high as $497 million dollars. But House officials say that’s because the governor attempted to increase state spending in his budget plan. The House’s budget calls on closing about a $340 million dollar gap, and without House Bill 2816, the chamber’s Finance Chair says that will be more difficult to do.
The bill looked at three major things to help balance the 2018 budget. First, it would’ve eliminated the film tax credit, putting $5 million back into general revenue. Second, it would’ve ended a transfer of monies from sales taxes on automobile products to the state road fund, putting about $12 million back into general revenue. And third, it would’ve increased the beer barrel tax, which estimated to bring in almost $3 million additional dollars.
This bill was up for passage in the chamber Tuesday, but was immediately met with opposition from members on both sides of the aisle. Several Democrats and Republicans opposed the bill because of its elimination of the film tax credit. But it was the beer barrel tax increase that had delegates like Republican Pat McGeehan from Hancock County fuming.
“So I’d just like to know, are we conservatives here? I thought the Republicans controlled this chamber. Maybe not, I don’t know,” McGeehan said, “Some members in my party seem like they’d like to take us back to the 1920s and early 1930s as prohibitionists. It’s not our job to pick and choose which legal products to tax. That’s called the ‘nanny state.’ It’s called free enterprise; that’s what we’re supposed to embrace.”
The bill failed 39 to 60. House Finance Chair Delegate Eric Nelson of Kanawha County says he was extremely surprised by the vote.
“You know what, we’re just going to continue – our idea of having a budget out by [Wednesday], which we were on a path of last Saturday; it’s going to be very difficult now,” Nelson noted, “So, you either have to look at cuts, or I hate to say it, revenue measures, and I don’t think the body, if they don’t look at a potential beer consumption change, where do you think they’ll be? Difficult times right now.”
Originally, delegates were also going to vote on House Bill 2933 Tuesday. It’s another bill to increase revenues for the state.
The bill in its current form reinstates a 3 percent food tax in October 2017, and it would also get rid of a number of exemptions to the current sales tax — like cell phones and professional services.
It would lower the sales tax from 6 to 5 percent in July 2018, and it would put a flat 5.1 percent rate on the personal income tax. All in all, the bill is estimated to bring in an additional $215 million between 2018 and 2020.
Delegates pushed consideration of that bill off until Wednesday.
Members of the House Finance Committee are expected to get their first look at the chamber’s budget for the 2018 fiscal year in a meeting this Saturday. In order to balance it, lawmakers will have to close an estimated $497 million hole.
To close the gap, Republican legislative leaders are largely looking to cut state spending, specifically in public education, higher education, and Medicaid, but on Friday, House Finance Committee members considered some new revenue increasing measures, or tax increases.
Credit Perry Bennett / West Virginia Legislative Photography
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West Virginia Legislative Photography
Del. Jason Barrett, D-Berkeley.
The House Finance Committee considered a committee substitute for House Bill 2816.
The bill would eliminate the West Virginia film tax credit – an annual $5 million cap awarded by the West Virginia Film Office to attract movie producers to the state. That elimination is one Democrat Jason Barrett, of Berkeley County, opposes.
Barrett says Berkeley and Jefferson Counties have hosted several Discovery Channel and National Geographic film shoots in recent years.
“This film tax credit brings people to the state of West Virginia; people who have never been here before, and probably wouldn’t come,” Barrett explained, “This brings them into our state; it allows them to see the beauty of West Virginia, not only in the Eastern Panhandle but the entire state.”
But the bill does a lot more more than just eliminate the tax credit. It also ends a transfer of some $12 million from the general revenue fund to the state’s road fund. That money comes from purchases of automobile parts and other items. Capturing the transfer and keeping it in general revenue will help balance the state’s budget.
The committee bill also includes provisions to increase the beer barrel tax, which is estimated to create an additional $3 million for the state.
The revenue aspect of the bill has changed quite a bit, though, since it was first introduced to the chamber on behalf of Gov. Jim Justice. It originally included an increase to the state’s sales tax and a new tax on businesses resulting in $400 million in new revenue. In total, the committee’s changes create only $15 million in increased revenue.
Minority House Finance Chair Delegate Brent Boggs spoke in opposition to the bill.
Credit Perry Bennett / West Virginia Legislative Photography
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West Virginia Legislative Photography
Del. Brent Boggs, D-Braxton, Minority House Finance Chair.
“I appreciate what little revenue it raises, but that’s the problem, it raises little revenue at a time that we need substantially more,” Boggs said, “and while no bill is perfect, and I’m sure no bill ever will be; this one falls way short of what I believe many of our needs are going to be, and it’s only a fraction of what was included in the governor’s original bill.”
Vice-Chair Delegate Eric Householder of Berkeley County spoke in favor of the bill.
“Under the original concept, if we were voting on the original concept, keep in mind, we would have a higher state sales tax, we would have $400 million in new taxes; more strain on an already existing economy that we’re seeing with our businesses that are having financial problems,” Householder said, “and I think for the most part, ladies and gentleman, this is a great compromise; it’s a better bill, and for those reasons, I support it.”
The bill passed on a roll call vote of 15 to 9, and will now be considered by the full House.
Credit Perry Bennett / West Virginia Legislative Photography
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West Virginia Legislative Photography
Del. Eric Householder, R-Berkeley, House Finance Vice-Chair.
There was another tax-related bill that moved in the House Friday. That bill is 2933, which expands the base of the current sales tax and lowers the overall rate to generate additional tax revenues.
Republican Delegate Riley Moore, of Jefferson County, is the lead sponsor. His bill would reduce the sales tax to 5.5 percent from the current 6 percent by January 1, 2018. It also ends current exemptions in the state sales tax on things like cell phones, personal and professional services, contracting services, mobile homes, and daycare services.
Credit Perry Bennett / West Virginia Legislative Photography
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West Virginia Legislative Photography
Del. Riley Moore, R-Jefferson.
According to the bill’s fiscal note, the bill would bring in $105.6 million during fiscal year 2018, largely from the telecommunications and service taxes.
Moore says his bill would require businesses and residents who aren’t currently paying taxes to start paying, which he says will make the state’s tax system fairer and more competitive, especially in border counties.
“I think this is the best way to try to be able to do that, to be able to grow our economy,” Moore noted, “and also, especially for me, I’m from Jefferson County, our sales tax is quite a bit higher than our neighboring counties in Virginia, in particular. We have a lot of our folks go shopping over there, and we’re trying to keep some of that tax money here in the state.”
Moore says he think his bill will set a good foundation for West Virginia’s economy moving forward.
The West Virginia Department of Commerce gave the House and Senate Finance committees a presentation Monday morning to explore the state’s competitiveness in attracting businesses.
The Commerce department also asked for a significant increase in its funding. However, that request collided with the reality of the state’s dire budget situation.
The Joint Standing Committee on Finance met in the House Chamber for the Department of Commerce’s informational meeting. The presentation was part of Governor Jim Justice’s Save Our State plan to bring more business and jobs to West Virginia.
The presentation explored ways the state could improve its competitive standing by enhancing infrastructure, building up a stronger workforce, and identifying good site building locations. Presenters also said that so-called Right-to-Work legislation has been a positive factor in attracting some businesses to the state.
But the state’s Right-to-Work legislation has not been fully implemented in West Virginia yet. It’s been challenged in a court case, and deemed unconstitutional by a Kanawha County Judge. The case will likely be decided by the West Virginia Supreme Court.
The Department of Commerce Cabinet Secretary Woody Thrasher says that even though the state is facing a budget shortfall this year, it’s not the time to cut the Commerce Department.
“West Virginia is dead last, and the reason we’re dead last, is a variety of reasons, but relative to the Department of Commerce, it’s because we do not have the tools in our toolbox to attract business specifically, really good sites,” Thrasher said, “I think we’re doing a really good job on workforce training. I think we’ve got a great quality of life, but we are way behind everybody else when it comes to having sites ready.”
Thrasher told lawmakers the Department of Commerce would need at least $35 million in increased funding for improving the state’s business climate, attracting more industry, and for site readiness.
House Finance Vice-Chair Eric Householder, of Berkeley County, says he felt inspired by the presentation, but he says increasing the Department’s budget could be tough.
“Right now, it’s going to be extremely difficult,” Householder said, “Currently we fund Commerce roughly around $10 million a year. It’s a tough budget year, as we all know, and it’s going to be extremely difficult, but we’re gonna do what we can. You gotta keep in mind, we’re trying to get the best return on investment for taxpayers.”
Democratic Delegate Larry Rowe, of Kanawha County, is a member of the House Finance Committee. He says he feels the request from the Commerce Department is a reasonable goal to achieve.
“We’re spending $10 million, and little of that is going to programming, most is going to personnel and expenses, so what I’d like to see us do is define very clearly what that extra money would be for and where it’s going to be spent,” Rowe said.
During the presentation, Cabinet Secretary Thrasher mentioned that by the end of the summer, he and his team hope to rebrand the state by having the Department of Tourism join the Department of Commerce. He also noted how getting the state’s Community Colleges involved more heavily in training the workforce will also be key in getting more industry in the state.
Gov. Jim Justice has asked lawmakers to do a politically unpopular thing this state Legislative session — raise taxes. But legislative leaders say they are still on the hunt for cuts to state government. Both the House and Senate Finance committees held meetings Thursday and heard from the Governor’s budget team, who attempted to convince lawmakers to see things the governor’s way.
On Wednesday night, Gov. Jim Justice presented lawmakers with his plan to balance the 2018 budget. The latest estimates from state revenue officials show there’s a nearly $500 million budget gap in the upcoming fiscal year, and in short, Justice wants to close it by increasing taxes and making some minor cuts. His proposal would create $450 million in new taxes and cut government spending almost $27 million.
But during his State of the State Address, the Governor’s Office also released what they are calling an alternative budget — a list of government agencies that would have to be cut if lawmakers choose not to raise any taxes this session. Justice’s alternative budget would close colleges and universities, the Department of Veterans’ Assistance, and end most senior services, among many other things. That alternative plan concerned the Minority Chairman of House Finance Delegate Brent Boggs, D-Braxton.
“When we’re faced with this kind of a deficit, we can’t possibly cut state government to the point that we lose so many vital services for so many segments of our population,” Boggs explained, “so I think that he said that he’s open to other cuts, but I think to think that we can possibly cut $450 million out and not really make West Virginia a very difficult place to live and to work, I think he’s right on point.”
On only the second day of the legislative session, there’s quite a way to go before lawmakers put a final spending plan in place, but Boggs said he’s optimistic about Justice’s proposal.
“He’s giving us how it is,” Boggs noted, “I don’t think; it’s something that’s sometimes, the medicine’s kind of bitter to take, but I think the takeaway, we need to make sure we do right by the citizens of this state.”
Thursday morning, representatives of the state budget and the governor’s offices presented the governor’s plan in more detail — details House Finance Chairman Eric Nelson, R-Kanawha, said were not included in Justice’s State of the State Address.
So he said he and his colleagues are just scratching the surface of the proposal.
“I look at some of the positives that were out there, you know tourism in areas of the state; infrastructure, but you know, the devil’s in the details, and gosh our back’s are against the wall,” Nelson said, “and so we’ve got to work all the way around; find areas of compromise, and many of his secretaries have only been in their position two weeks, so let’s work through this.”
Thursday afternoon, across the rotunda — members of the Senate Finance Committee were given that same detailed presentation by the director of the State Budget Office, Mark McKown. He was asked about that alternative budget made up solely of cuts to government, first by Sen. Corey Palumbo, D-Kanawha.
“Was the point of this exercise to come up with the cuts that [would be the least harmful] or the most shocking?” Palumbo asked.
McKown said the Governor’s Office wanted to avoid cuts to public education and most Medicaid coverage while also keeping the state’s prisons and jails open, but otherwise, McKown said there isn’t much left in the budget to cut.
Senate Finance Chairman Mike Hall added his own thoughts.
“Obviously, to a lot of minds it would be unacceptable to do several of the things on here,” Hall said, “The question is, are there other things not on here that total up to a substantial amount of money and my belief is, having looked at the budget, there are not other things unless you go to the school aid formula or the Medicaid line.”
Hall said his Finance Committee will split into subgroups to dig through smaller sections of the budget to find additional places to cut. That work will begin after the committee hears from all of the state agencies during their budget presentations this month.
A bill that would reduce the state’s severance tax on coal and natural gas from 5 percent to 3 percent has been postponed in the House.
Senate Bill 705 was taken off the table for lawmakers this session and instead was turned into an interim study measure during a House Finance Committee meeting Wednesday. That would give the legislature time to study the effects of the tax cut in more detail during the months between legislative sessions.
The bill passed quickly through the Senate, but with some debate. Some argue the proposed 2 percent cut over two years would help aid a struggling industry, while others say the bill would simply mean government-funded services in coal-producing counties would shoulder the cuts.
House Finance Chairman, Eric Nelson, says lawmakers need more time to consider a bill that would decrease state revenue, especially in a tight fiscal year.
“These taxes, according to that bill, would not have been dropped until fiscal year 2018, so it would have been July 2017,” Nelson said. “What a study does is, it puts much greater emphasis on addressing potentially reducing this tax, helping these industries out, and we can look at that over the next 8 months. Then, at the beginning of next session, then, we are handling a tax reduction that can potentially help some industries. Instead of hitting this in the last few days of this session and rushing into something we will second guess later.”
Lawmakers did approve another measure to cut some taxes for the coal and natural gas industries this session. The bill got rid of a surcharge on the resources that was helping to pay off the state’s Worker’s Compensation Debt. That bill was already signed by Governor Tomblin.
