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Budget impasse continues as House snuffs out tobacco tax

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Budget impasse continues as House snuffs out tobacco tax
By Pamela Pritt Register, Herald Reporter

Undeterred by the failure of a tobacco tax in the House of Delegates Tuesday, Senate Majority Leader Mitch Carmichael said the GOP leadership will now focus on other revenue-producing measures to bolster an ailing state budget now $271 million out of whack.

As soon as the House vote failed, a war of words broke out between Speaker of the House Tim Armstead and Gov. Earl Ray Tomblin – and while Carmichael wasn’t talking specifics, he may be eyeing a $1 hike in the cigarette tax, and he’ll need just about all 36 Democratic votes in the House to pass that bill. While 19 Republicans decamped from their leadership's intent to pass a 45-cent tax increase on cigarettes, more are likely to fall off the wagon if the tax goes higher, making 51 votes harder to obtain without help from Democrats. 

A $1 per-pack increase on cigarettes passed the Senate during the regular session, but failed to make it out of the House Finance Committee. The bill was estimated to bring in $115 million. 

The state advances toward a tight June 30 deadline to pass a balanced budget and Tomblin wants lawmakers to get off the dime to pass bills that will increase revenues now because of low prices and the slide of production in the energy sector. West Virginia has no mechanism to operate without a spending plan in the next fiscal year; lack of action on a budget in effect shuts down state government. 

Armstead, R-Kanawha, said the chamber's leadership had known the failed bill was a "controversial piece of legislation.

"We felt we owed it to the governor and to this process to put this bill before the legislature and let the legislature make the decision," Armstead said. But he also offered some criticism for Tomblin. "We expected the governor to be more involved, obviously, seeking passage of this legislation from his own (Democrat) members," the Speaker continued.

Tomblin was quick to answer that.

"As I recall, he's the Speaker of the House," Tomblin said. "You get there by having the majority of the votes. That's called the majority party; the majority leads. That's what we're looking for."

The tobacco bill narrowly escaped the Senate chamber last week on a 17-16 vote, with one Democrat voting in favor, one Republican voting against and one Republican "taking a walk" just prior to the action.

"We'll look at other measures to look at cuts in state government, as well as additional revenue measures," Carmichael said. "We'll be meeting to determine if the other revenue measures the governor proposed are now appropriate to the scenario we're facing." 

He said that could include a return of a tobacco tax bill, this time at a $1 per pack increase on cigarettes. 

Tomblin's $4 billion budget proposal includes three revenue measures — $78 million from the tobacco tax, $60 million from a telecommunications tax and and up to $200 million from a 1 percent increase in the sales tax — and features budget cuts of $90 million.

Other revenue measures have not seen the light of day during the seven days the legislature has been in extraordinary session. Those bills did not get a sponsor in the House of Delegates and only Senate Minority Leader Jeff Kessler, D-Marshall, sponsored them in the Senate.

A $1 a pack tax was the tipping point for House Democrats, who said on the floor Tuesday they would vote against a 45-cent tax increase because it was not enough to either deter young smokers or to fully fund the Public Employees Insurance Agency, which has its own financial deficit. State employees, including teachers, are likely to see both premium increases and a reduction in benefits — higher co-pays and deductibles — without some additional money from state government. PEIA's executive director Ted Cheatham has said it would take about $91 million to fully fund his agency.

Carmichael said he "questioned the sincerity" of House Democrats, but if the GOP believes it can get 51 votes, will move with the higher tax amount. Tomblin's original bill would have raised the per-pack tax on cigarettes by 45 cents, other tobacco products to 12 percent and created a 7.5 cent tax on e-cigarette fluids. Delegate Larry Faircloth, R-Berkeley, amended the bill on the House floor to remove e-cigarette fluids from being taxed, reducing the revenue estimates to $76.2 million. Faircloth voted against the bill.

Failure of the only revenue measure on the table at this point, leaves Armstead to believe that Tomblin will have to buckle and agree to a larger withdrawal from the state's Rainy Day Fund.

"I think that makes it incumbent on the governor to work with us. This proposal was not accepted, this was his piece of legislation," Armstead said. "He's going to have to work with us on the cuts and the Rainy Day Fund that's going to be used to balance the budget."

Visibly frustrated and angry, House Finance Chair Eric Nelson, R-Kanawha, predicted a budget bill that takes too much from the state's Rainy Day Fund — likely now $135 million — will be swiftly vetoed by Gov. Earl Ray Tomblin.

"He's exactly right," Tomblin said. "It's up to them to do one of two things: raise revenues or cut the budget $272 million."

Any override of a budget veto would require a two-thirds majority, not the simple majority needed for other bills in the regular session.

About 30 House members spoke on the floor during the three hours of debate it took to defeat the bill 44-55.

Delegates "Boogie" Ambler, R-Greenbrier; Lynn Arvon, R-Raleigh; Roy Cooper, R-Summers; Tom Fast, R-Fayette; and John Shott, R-Mercer, voted in favor of the bill.

Delegates Mick Bates, D-Raleigh; Marty Gearheart, R-Mercer; Kayla Kessinger, R-Fayette; Ricky Moye, D-Raleigh; and Minority Whip John O'Neal, R-Raleigh, voted against.

The Rainy Day Fund has about $806 million in it now. For the state to maintain its bond rating — just lowered to AA- this spring — 15 percent of the general revenue fund must be maintained in the fund, or about $646 million. The bond rating is important because all government entities, including the state, counties, municipalities and political subdivisions, will pay higher interest rates on bonds for any projects or infrastructure improvements.

Lawmakers left Charleston in March with no spending plan after Tomblin announced a greater than anticipated revenue slump of $92 million in this budget year. Before that, however, the legislative chambers had such disparate budgets there was no room for compromise. The Senate passed several million dollars in revenue measures including a $1 tax increase on cigarettes and a 3 cent tax on gasoline when fuel prices were at $2 a gallon or below. Those bills never made it out of the House Finance Committee.