Tax Reform Story Archives - West Virginia Public Broadcasting

Setting State Revenue Estimates Subject Of Debate

Revenue Secretary Dave Hardy said executive branch revenue estimate settings are ingrained in constitutional code.

West Virginia’s annual budget is based on revenue estimates that come from the governor’s office. The budget surplus comes from taxes collected above those revenue estimates. How those estimated amounts are determined garners differing points of view.

Sean O’Leary is the senior policy analyst at the West Virginia Center on Budget and Policy. He said when the Justice administration pointed out that this April’s general revenue collection beat the estimate by $319 million, the base budget estimate of $509 million was $284 million below last year’s actual collections of $791 million. O’ Leary called the surplus ”smoke and mirrors.”

“You’d have to assume that the governor and the budget office thought that the economy was going to collapse,” O’Leary said. “So these revenue estimates were set intentionally low in order to keep the budget low, and to generate these large surpluses.”

Revenue Secretary Dave Hardy said executive branch revenue estimate settings are ingrained in constitutional code.

“In 1968, West Virginians voted on a constitutional amendment,” Hardy said. “We call it the modern budget amendment, even though now it’s not so modern. It allows the governor to set the revenue estimates for the state of West Virginia. So every year, our governor sets the revenue estimates and then the legislature can only budget up to the limit that he sets.”

O’Leary said, unlike West Virginia, many states open up their revenue estimate setting process, getting many parties involved.

“When they do revenue estimates, they do a consensus forecast,” O’leary said. “Most other states do this where they have the tax department, someone from the university, some economists and they’ll have the legislature involved as well. And then you get more realistic revenue estimates.”

Gov. Jim Justice said his revenue estimates and budget drafting have all the transparency and outside involvement in the world.

Hardy said the governor presents a budget on the first night of the legislative session. “We literally spend 60 days talking to the legislators and our constituents and stakeholders on whether that’s the proper budget that the governor’s proposed at the back end of this process,” Hardy said.

Responding to the question of possibly setting revenue estimates too low, Justice said he’s a conservative businessman who minds the store by not being frivolous and wasteful.

“We took care of our counties the right way,” Justice said. “We have given significant pay raises four times, and the state is cooking because we didn’t go throwing money away on frivolous projects. But we sure got a bunch of folks out there that we can still help.”

Justice said a priority is stemming the corrections crisis. He wants to allocate pay raises to keep corrections officers on the job without seeking significantly higher paying positions in border states. He has said he wouldn’t call a special legislative session without a plan that has house and senate consensus. When Hardy was asked why corrections pay increase wasn’t put in the budget, he said there is some movement right now.

“There’s a plan that’s being formulated now in consultation with the legislature to meet that head on,” Hardy said. “But it can be done in a very intelligent way and it can be done through our base budget in fiscal year 2024.”

Hardy said, “throwing money at a problem is not the answer, having a plan and thinking it through is what you need to do.”

Delegates Reflect On Passed, Failed Legislative Session Initiatives

Several lawmakers called the just completed legislative session historic, while others are left with concerns over a focus on major economic development rather than helping working West Virginians.

Just moments after he struck the final midnight gavel ending the 60-day session, Speaker of the House, Roger Hanshaw, R-Clay, said passing the Third Grade Success Act was among the biggest priorities lawmakers accomplished. The speaker followed that thought with a profound overall session assessment.

“I’ll go so far as to use the word historic,” he said. “So in these last 60 days, we have divided and made more accountable the largest entity of state government in DHHR [West Virginia Department of Health and Human Resources]. We have passed the largest tax cut and put more money back in the pockets of West Virginians than any legislature ever in history. We have restructured and reformed the Public Employees Insurance Agency (PEIA) and put it on a secure footing for the next generation of public employees and school teachers. And we’ve done all that while giving pay raises to our public employees and putting teachers aides in all first, second [and] third grade classrooms in West Virginia without raising $1 of taxes.”

From the Democratic side, House Minority Whip Shawn Fluharty, D-Ohio, said while debate was less abrasive and more congenial than sessions past, he thought the allocations of a more than $1 billion state budget surplus were tilted too far away from the working class.

“We shouldn’t have had PEIA premium increases,” he said. “I mean, we have record surpluses and now we have record PEIA increases, tell me how that happens? We found a way to give pay raises to legislators, which I certainly do not support, pay raises to the governor, pay raises to everybody, and we’re gonna give increases to the PEIA recipients. It’s the one thing that they’ve held on to for years. We gave away hundreds of millions of dollars to potential projects and we ignored those who are actually here. They’re actually working and had been in West Virginia for many years raising their families. And we told them, ‘you’re getting the increase.’”

A year ago, members from both sides of the aisle dealt with troubles with foster care, a crisis CPS worker shortage and a Department of Health and Human Resources in disarray. House Health Committee Chair Amy Summers, R-Tyler, said the reorganization of DHHR, along with new initiatives and leadership, will lead to better outcomes for the health and welfare of the state’s most vulnerable residents.

“I’m just excited that we’re on a new path, we are going to come up with some solutions,” Summers said. “We feel that the DHHR division is really going to give us more insight and direction into those departments. I’m just excited about everything that’s happened this session and we’re going to continue to work hard. It’s just the first step. We’re going to continue to work hard to evaluate all of those different issues that we have during the interims that are coming up.”

House Minority Leader Doug Skaff, D-Kanawha, said while tax cuts and pay raises were welcomed by working West Virginians, he and others from both parties have grave concerns over slighting the crisis in state corrections – a 33 percent employee vacancy rate and more than $40 million spent on stop-gap National Guard jail and prison support.

“I wish we would have put more focus on public education and more focus on getting a cost of living adjusted for our retirees, and the one thing that we didn’t do is our costs in our jail system or in the corrections are just continuing to be a mess,” Skaff said. “You’ve got to focus on not kicking the can down the road with record surpluses. You can still do more until there’s no vacancies out there. I say, let’s keep working harder, we gotta fill all those public employee positions that are out there because they take care of our people of West Virginia. I’m glad we’re finally, after years, giving some of the money back to the West Virginians, and I’m okay with that. But I just think we need to get our house in order first before you give out the rest of the money.”

House Technology and Infrastructure Committee Chair, Del. Daniel Linville, R-Cabell, said he was disappointed in a lack of progressive legislation passed from his committee.

“There’s several pieces of cutting red tape or several pieces of legislation that did that in regards to infrastructure development,” he said. “There’s also been some bills relative to broadband that just didn’t make it across the finish line. It’s always a struggle, but we want to make our state the fastest place to deploy all infrastructure, especially in this inflationary environment.”

Nearly every delegate WVPB spoke with said much of the legislation passed was just a first step. Now, we will see in what direction those steps may head.

House Passes PEIA Reform Legislation To Prevent Program Collapse

After more than three hours of passionate debate riddled with number crunching and tales of the haves and have nots, Senate Bill 268, meant to shore up the state’s Public Employees Insurance Agency passed with a 69 to 27 vote and four members absent.

Updated on Saturday, March 4, 2023 at 3 p.m.

After more than three hours of passionate debate riddled with number crunching and tales of the haves and have nots, Senate Bill 268, meant to shore up the state’s Public Employees Insurance Agency (PEIA) passed with a 69 to 27 vote and four members absent.

The bill presenter, Del. Matthew Rohrbach, R-Cabell, spoke of a ballooning PEIA deficit that now stands at $154 million and will loom to more than $422 million by 2027 without reform.

The proposal raises the insured member premiums 24.7 percent, keeps the health insurance payment at an 80 to 20 split, charges an additional $147 per month to maintain a spouse in PEIA coverage and raises medicare reimbursement rates to West Virginia hospitals to 110 percent.

Rohrbach talked of primary care providers denying PEIA policy holders medical treatment, saying this is the first significant premium hike in a dozen years, and a combination of a proposed $2,300 state employee pay raise coupled with tax cuts would help offset the premium increase.

“Failure to act is not an option for a couple of reasons, one of which I just gave you about the dire financial straits that we’re headed towards,” Rohrbach said. “We’re heading into worker’s comp 2.0, where the program is about to collapse.”

Del. Larry Rowe, D-Kanawha, said his calculations showed it would cost a PEIA policyholder who wanted to keep a spouse covered $2,400 a year, negating any pay raise increase.

Bill amendments adopted include keeping an 80/20 payment to those using out-of-state health providers working in contiguous border counties, folding in Senate Bill 577, limiting insulin co-pays to $35 and preventing the state from adding immunizations to be required, stating that state code would need to be revised.

Amendments that failed included waiting until fiscal year 2025 to implement premium increases and limiting premium hikes to 10 percent a year.

Votes against the bill from Republicans like Del. Todd Kirby, R-Raleigh, came with outrage that the state would use $500 million to boost economic development instead of helping its 230,000 workers maintain their health insurance.

“When you hear the proponents of this bill talking about investment, what they’re really talking about are deals in which our government, excuse me, our taxpayers dollars, are given not as loans, not as tax incentives, but are just given to international corporations,” Kirby said. “Given to some of the richest people in the world with zero guarantee that our people will ever get any return on our tax dollars.”

Del. Joey Garcia, D-Marion, said his no vote came with seeing previous PEIA fixes come without a more than a $1 billion current state surplus.

“There was a bill that passed that created the PEIA stabilization fund and it is a pretty interesting concept,” Garcia said. “It would allow the legislature to put money into that fund but it also allowed for the Secretary of Revenue to try to take from certain special revenue sources every quarter. I find it interesting, when we didn’t have the money, we found a way. Now that we have the money we are looking for a way out of doing what is right for our public employees.”

Rohrbach closed debate on the bill by reiterating that Senate Bill 268 was the best way at this time to prevent PEIA from going under.

“If we keep the failing system of frozen premiums and direct general transfer funds that we currently have, it’s also going to risk collapsing provider availability and it ultimately risks the solvency of PEIA is the place that we’re headed right now,” Rohrbach said. “If this was a private health insurance plan, the state insurance commissioner would have us under a severe watch list heading towards insolvency. Therefore, the conclusions were reached that this plan has to be stabilized.”

The bill was voted effective from passage. It now goes back to the Senate to consider the amendments from the House.

**Editor’s note: A previous version of this story said the fee was $147. We have clarified to reflect that the fee is monthly.

Union Leaders Voice Opposition To PEIA Bill

Union representatives say Senate Bill 268 would benefit the richest and hurt the poorest.

The Senate’s Public Employees Insurance Agency (PEIA) bill is now in the hands of the House of Delegates. Proposed health insurance premium increases and coverage reductions to shore up the financially challenged program have many up in arms. Bill defenders say proposed pay raises and tax cuts will even things out.

Union leaders representing many of the state’s 230,000 participants in the program held a press conference just outside the House chamber Friday morning. This comes after the House Finance Committee advanced the bill to the House floor Thursday night.

Union representatives say Senate Bill 268 would benefit the richest and hurt the poorest by triggering a 26 percent premium increase, penalizing public employees that are married, potentially leading to the exclusion of first responders from PEIA and creating uncertainty for retirees.

West Virginia AFL-CIO President Josh Sword led the union charge.

“The plan is designed in their mind to address the solvency of PEIA by reducing benefits on the plan participants and kicking people off the plan,” Sword said. “As opposed to finding and directing a dedicated revenue stream. That’s our number one goal.”

In countering the union’s claim, House Finance Committee member Del. John Paul Hott, R-Grant, said state actuarial data shows a $2,300 raise coupled with personal income and vehicle tax cuts will even things out – and help counter an expected $400 million PEIA shortfall coming in the next few years.

“If we don’t address the issue, it will be insolvent probably within the next three to five years,” Hott said. “Some of the pros would be that accompanying that bill is a raise for the public employees with an attempt to offset the average increase in premium and hopefully be some type of a net positive.”

House Finance Committee member Del. Larry Rowe, D-Kanawha, called the current PEIA proposal unfair with advantages going to those with higher incomes. Rowe explained an amendment he was planning to propose to help fund PEIA.

“What we need to do is to refund the rainy day fund that we’ve had for a number of years,” Rowe said. “I’ll have an amendment to do that on the floor, but $100 million, and that would eliminate these huge increases.”

Sword was asked where the shore-up money should come from if not PEIA members. He said premium increases were expected sooner or later, but not this large lump sum and talked of tapping the state’s billion dollar plus surplus.

“I think the surplus is a good place to start. We’re swimming in money down here and there is no excuse,” Sword said. “We can make it right. Get all the stakeholders in the room and have some honest dialogue. If we can get them to that point, we could come up with a solution that we can all buy in on.”

On Friday, the House moved SB 268 to third reading with the right to amend. Several amendments are expected. The House will reconvene Saturday morning at 9 a.m.

House Budget Bill Goes To Floor With Questions

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.

House Will Study Tax Reform Plan Passed By Senate

House of Delegates members said on Monday there is no rush in offering the people of West Virginia well deserved, and well thought out tax relief.

The Senate and Gov. Jim Justice now agree on the amended House Bill 2526, the estimated $750 million Senate plan that includes an initial personal income tax cut, a personal property tax credit for vehicles and a property tax break on equipment and inventory aimed at small businesses.

The 20.25 percent personal income tax cut – higher than the Senate’s initial proposal of 15 percent but lower than the House’s proposal of 30 percent – would be effective retroactively to January 1, 2023.

A provision to trigger future income tax reductions, similar to the one in the Senate’s original proposal, is included with changes. The new formula is based on a comparison of general revenue collections in a fiscal year minus severance tax collection as compared to the base year of 2019.

Adjusted for inflation, if the general revenue collections minus the severance tax collections exceed the adjusted base year, a reduction would be triggered.

The amendment also includes a refundable tax credit for personal property paid on automobiles and 100 percent refundable tax credit for disabled veterans against personal income taxes paid on homesteads, both remaining unchanged from the original Senate proposal.

Small businesses with an appraised value of $1 million or less would be given a tax credit allowing a 50 percent refund against personal and corporate net income tax for personal property.

The removal of the so-called “marriage tax penalty” was not included as part of the compromise.

The bill was received by the house on Monday.

However, House Majority Whip and Finance Committee member Marty Gearheart, R-Mercer, said there needs to be a close examination of the Senate tax proposal before any final decisions are made.

“There have been a lot of negotiations and a lot of conversation, and a bill is coming to us. There is a lot of detail in that bill. And we want to be certain to go through it to make sure it is correct and something that we can work with,” Gearheart said. “The House members overall are interested in cutting taxes for West Virginians. This is a vessel to do that and we’re going to examine it closely to make sure it’s right and proper and deal with it at that point.”

Gearhart said there are no rubber stamps, by the House of Delegates or the Senate.