At the Capitol: Legislature approves budget plan

By Phil Kabler
For the West Virginia Press Association

After 20 days in special session, at a cost of more than $600,000, legislators figuratively threw up their hands and gave up on efforts to reach a compromise on how to raise tax revenue to close shortfalls in the 2017-18 budget.

Instead, with prospects of a July 1 state government bearing down on them if they failed to act, both houses on Friday passed a bare-bones $4.225 billion budget, a state spending plan for the coming budget year that’s some $125 million less than the budget sought by Gov. Jim Justice.

With no new revenue to plug shortfalls, the budget makes a number of spending cuts, including cutting budgets for state colleges and universities from 4.6 percent to 6.6 percent for a total of $16 million.

“This is an immoral budget. It’s being balanced on the backs of young people,” Delegate Larry Rowe, D-Kanawha, said of the higher education budget cuts.

The tight budget also cut out most of the improvements sought by Justice, including pay raises for teachers, funding for a Save Our State economic development program, and increased tourism promotion funding.

“I guess the pathway to prosperity has been pretty much shot down,” commented Sen. Richard Ojeda, D-Logan.

Ojeda was one of many legislators who expressed frustration and disgust that 20 days in session over the course of six weeks had come up with a budget bill not significantly improved on the proposal Justice had ceremoniously vetoed back on Apr. 14.

Ultimately, neither House nor Senate leadership would budge on their respective plans to raise revenue.

In another twist in the tortuous 20-day session, the Senate Thursday passed its latest variation of a revenue plan. Like previous versions, it proposed raising the state sales tax to raise revenue, eliminating some sales tax exemptions – the largest being for telecommunications services, i.e., cellphone plans – but also included a phase-down of state income tax rates.

However, it was the slowest and most conservative version of the income tax cuts proposed by the Senate, slowing the phase-out of income taxes to 5 percent annual reductions, with cuts after the first year occurring only if overall revenue growth from sales and income taxes exceeds five-year rolling averages.

The Senate plan would have raised about $125 million for the 2017-18 budget – enough to fund Justice’s economic initiatives – revenue that would have dropped off and become deficits as the income tax cuts expanded in future years.

However, House leadership had been adamantly opposed to including the income tax cuts as part of any revenue plan, and on Friday took the Senate plan and replaced it with a version of the revenue proposal the House had backed throughout the session.

“There’s not the will to move forward with it,” House Speaker Tim Armstead, R-Kanawha, said of the House’s objections to including income tax reductions in any revenue bill.

“We’ve said through many votes this session that the personal income tax reforms are not something we think should take place this year,” he added.

The House plan had no tax increases per se, but increased revenue by “broadening the base,” eliminating some sales tax exemptions, including many also included in the Senate proposal.

The House proposal would have raised about $86 million for the 2017-18 budget, but perks in the bill, including income tax exemptions for Social Security retirement and military pensions, an increased personal income tax deductible from $2,000 to $2,500 and expanded credits for historic-building rehabilitation, would have cut the net revenue gain to about $67 million.

Instead, the Legislature passed a budget with no new revenue, meaning the Legislature will be facing more dire budget shortfalls in 2018.

“Is this a happy moment? No, but this is a constitutional obligation we have to fulfill,” Senate Finance Chairman Mike Hall, R-Putnam, said, citing the deadline to have the new budget in place by July 1.

The final day of the session did have some bright moments for Justice, as the Legislature passed bills to increase the state gas tax, the state privilege tax on vehicle sales, and various DMV fees to raise about $130 million a year for road construction.

Legislators also passed a bill to continue tolls on the West Virginia Turnpike. Ultimately, the new road funds and toll revenue will be used to help finance up to $2.8 billion of road bonds Justice plans to sell as part of a major road construction/economic stimulus program.

“Three words: Jobs, jobs, jobs,” Delegate Barbara Fleischauer, D-Monongalia, said in urging support for the roads measure. “That is one of the main things our constituents want … and the other thing is to fix the damn roads.”

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