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What the new state budget does and doesn't do

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What the new state budget does and doesn't do
By Brad McElhinny, WV MetroNews

CHARLESTON, W.Va. — Gov. Jim Justice says a budget he’s allowing to become law without his signature is a travesty.

The budget passed last Friday night by the Legislature does make cuts to a wide variety of state programs.

It’s about $280 million less than what the governor proposed in his State of the State address and almost $125 million less than the budget the governor proposed in special session.

“If you want my true feelings about what we have, I think we have a travesty,” the governor said Wednesday at a news conference.

“As best I can tell you, I can’t sign this. I can’t possibly sign this because of the pain that it’s going to cause so many people and the direction that it puts us in basically solving none of our problems.”

The governor said he signed the budget bill only because the state was finally up against the start of the new fiscal year on July 1.

Justice had an entire whiteboard dedicated to the cuts present in the budget.

 

What the budget doesn’t do

Some of the most significant aspects of the budget are encompassed by what it doesn’t do.

The bill the governor favored, one backed by Senate Republicans, would have raised an estimated $92 million in additional revenue for the coming fiscal year.

Democrats and House Republicans objected to aspects of that plan that would have raised sales taxes while cutting personal income taxes.

Those groups had agreed to a conference committee proposal that would have extended the sales tax to additional economic sectors. That proposal was estimated to bring in an additional $67 million.

Senate Republicans didn’t favor any plan that didn’t include the income tax reductions, so in the end both revenue proposals went nowhere.

The bill that passed removes all of the sales tax increases that would have led to additional revenue.

The budget bill also leaves out income tax reductions favored by Senate Republicans and the governor.

Aspects of that proposal such as tax breaks on veterans retirement and Social Security income also fell through, as did a rebate for low-wage earners.

There were multiple incarnations of the income tax plan and almost everyone had trouble tracking the financial effects. The Tax Foundation, which advocates for tax cuts, took note of the various plans.

Most projections showed revenue holes in coming years, although the proposals presented late in the special session were less aggressive.

Proponents said the income tax cuts would give citizens a break and would have stimulated the economy. But critics noted that the same citizens would also be paying greater sales taxes — probably significantly greater for lower earners.

It’s hard to specify a full effect because the sales tax increase and income tax reduction proposals — including the brackets and rates — changed so many times.

The last version of that budget estimates $50 million or more in additional revenue over the coming years, but that assumes no further triggered income tax reductions. More reductions would have resulted in deficits unless the economy truly picked up.

The budget does not include a tiered coal severance tax system that the governor said would have given struggling companies a boost when prices are low. Going ahead would have meant a loss of $37 million in revenue, estimates showed.

“It’s going to hurt our coal miners for nothing, for nothing,” Justice said. “We had the best tiering possibility on the planet.”

The budget does not have a payraise for teachers, which would have cost about $19 million. “We threw our teachers in a ditch,” Justice said.

It does not have the governor’s Save Our State fund for infrastructure and economic development. That was a $105 million idea when first presented and then scaled back to $25 million.

What stays the same, through fiscal sleight of hand

The budget keeps Medicaid spending even, avoiding the sacrifice of federal matching funds. It does so, though, with a blend of transfers and expected surpluses.

That’s essentially an $84 million backfill of Medicaid. Lawmakers said those surpluses, based on past experience, are almost certain to be there.

That was enough to get the administration to turn off a state-of-emergency lantern atop the Capitol, although the governor still didn’t like the funding mechanism.

“We have fake surplus money that will lead to additional DHHR and Medicaid cuts, guarantee it,” Justice said.

 

What gets cut

The West Virginia Center for Budget and Policy, which analyzes and advocates about taxes, has a handy breakdown with a chart of the cuts.

The cuts that created the biggest concern among lawmakers, particularly Democrats, were to the state’s higher education system.

The budget cuts $7.5 million from colleges and universities, $2.5 million from colleges and universities, $323,000 for community and technical education and $228,000 from the higher education policy commission.

That’s on top of a $10 million higher education cut in the governor’s original budget proposal.

There’s a $5.3 million cut from the Department of Education. That includes a $1 million cut from 21st Century Assessment and Professional Development and eliminating Innovation in Education and Technology Systems Specialist funding at $4.5 million.

There’s a $4.5 million cut from the Division of Health. That includes eliminating $3 million in funding for the Tobacco Education Program.

Read more here.