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Tomblin announces 4 percent budget cut for state agencies

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Tomblin announces 4 percent budget cut for state agencies
By David Gutman, The Charleston Gazette-Mail

Gov. Earl Ray Tomblin on Monday announced an across-the-board 4 percent cut for most state government agencies, a move he said is necessary due to “unexpected and unprecedented” drops in the state’s severance tax collections.

State aid to public schools, which has been spared in recent years of budget cuts, will see a 1 percent cut this year, Tomblin announced.

State officials are projecting a $250 million budget deficit for fiscal year 2016, which started July 1 and ends in June 2016. That includes a projected $190 million shortfall in severance tax revenues, collected from coal, oil, gas and timber.

As of Sept. 30, just three months into the fiscal year, general revenues were more than $60 million behind estimates, a news release from Tomblin’s office said. That number is five times larger than the $12 million deficit that the state had at the end of August, just one month prior.

Severance tax revenues dropped a whopping 36 percent during July and August, after dropping 31 percent in April, May and June, Tomblin said.

“This is a difficult decision that results from several factors beyond our control,” the governor said in a prepared statement. “We are taking this action based on trends we see in the first three months of the fiscal year that we expect to continue throughout this budget cycle. While the cuts we’re enacting today will not be easy, we must maintain a balanced budget and this will help us do that.”

The just-announced cuts come at a time when the state’s finances are already stretched thin.

The new cuts come on top of two consecutive years of 7.5 percent budget cuts to most state agencies.

Meanwhile, the governor’s Blue Ribbon Commission Highways estimates the state will need an additional $1 billion to be able to adequately build and maintain the state highway system.

At the same time, the state Legislature has announced its intentions to reform the state tax code. The Legislature’s Committee on Tax Reform heard, on Monday, from the conservative Tax Foundation which touted repeal of the state personal property tax, a move that, with no offsets, would blow a $300 million hole in the state budget.

House Speaker Tim Armstead, R-Kanawha, blamed the Obama administration’s “anti-coal policies” for the budget problems.

“These figures show West Virginia’s economy is in a deep crisis,” Armstead said, in a prepared statement. “In the coming legislative session we will need to act carefully to be good stewards of the taxpayers’ money. However this situation also underscores the need to take bold, aggressive steps to dramatically improve our business climate, attract new investment and create jobs, which will all in turn generate more revenue for the state.”

The 4 percent cut to state agencies will not be enough, by itself, to fill the budget gap, Tomblin’s office said.

The cuts represent more than $100 million, but the state will also “use one-time appropriations to close the budget gap,” according to the statement. Tomblin’s office did not specify the nature of those appropriations.

The state hiring freeze, which has been in place for nearly three years, will remain in place. Nonessential travel for state employees will be eliminated, Tomblin said, and annual holiday parties will be canceled.

Tomblin said that it may also be necessary to take money from the state Rainy Day Fund, although he said he would work to keep that number as low as possible.

Last year the state drew about $15 million from the Rainy Day Fund, although that was less than the $85 million that had been forecast.

Tomblin’s office said he met with legislative leaders on Monday afternoon to discuss the situation.

Tomblin said that coal production is down 15 percent this year, as compared to last year, while natural gas production is up 30 percent. But, natural gas tax revenues are expected to drop because of lower prices.

“Gas prices are so low, that they might pay you to turn your heater on,” Senate Finance Chairman Mike Hall, R-Putnam, said earlier Monday.