Crunch time: Lawmakers down to the wire for state budget

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Crunch time: Lawmakers down to the wire for state budget
By Pamela Pritt Register-Herald Reporter

With a mandate to balance a budget and only six days left to go to pass bills to move that process along, lawmakers are still searching for ways to make the numbers fall in line. Since one major revenue measure failed in a House of Delegates committee this week, they're left with few options.

Gov. Earl Ray Tomblin presented a balanced budget to the Legislature in January. With a mix of tax increases, budget cuts, contract negotiations and a dip into the state's Rainy Day Fund, Tomblin's $4.3 billion plan was handed over to both chambers where bills were drafted to make it work.

Or not.

One of the tax increase proposals, a 6 percent tax on telecommunications data packages, never got traction. But the tax increase on tobacco products in the Senate made up for that by raising the tax from 45 cents per pack to $1. The bill also included a 12 percent tax on other tobacco products and a new tax on e-cigarette fluids. It would have meant $130 million a year for state revenues. Senators cited not only the revenue aspect, but the deterrent for young people to use tobacco, creating long-term better health outcomes.

The House of Delegates Committee on Finance amended the bill back to the governor's 45-cent proposal, then excised the other taxes before defeating it in committee altogether.

A frustrated committee chair, Delegate Eric Nelson, R-Kanawha, voted no, but for a reason other than opposition to the measure. Any vote on the prevailing side can move to reconsider the bill, and Nelson had hoped it could happen. But his search for votes both Thursday night and Friday morning proved fruitless.

"Politics is coming into play," Nelson said.

Democrats on the committee voted against the bill because they believed 45 cents was not enough, while other Republicans voted nay because they don't believe in any tax increases, he said.

"That bill would have brought $71 million (with only the cigarette tax) into the 2017 budget," Nelson said.

At the other end of the hall, senators are frustrated with the death of the bill.

"I'm a little disappointed at that, frankly," said Senate Majority Leader Mitch Carmichael. "For those who claim that a dollar is great public policy, for them to say that, contrary to that, 50 cents is bad public policy doesn't make a lot of sense to me. In the legislative process we have to learn to compromise. Take a half measure when you can and move forward."

Nelson's counterpart in the Senate, Mike Hall, R-Putnam, said the Senate's budget centered around its $130 million bill. But Hall has hope that one other revenue bill might survive.

It's SB 555, which would raise the sales tax by 1 percent, hike Department of Motor Vehicles fees, lower the privilege tax rate and boost the gasoline tax by 3 cents as long as gas is $2 a gallon or less.

But Nelson says the chances of that coming out of the House the way it went in are slim. An increase in the sales tax, for one thing, is a nonstarter, he said.

The House is dealing with three disparate factions, Nelson said. There's a camp who will not agree to any new revenue measures, one that believes cuts solve every budget issue and the compromisers.

Nelson noted that the budget has already been cut by $90 million held over from the 2016 budget, and lawmakers have eliminated expenditures that total approximately $100 million. Even with those cuts, Nelson said the budget is "still out of whack."

"We just have to get to a balanced budget," Hall said. "This is a strange year; there's never been one like this. We know in advance unless they do something on the last night that we're going to be wide apart in terms of revenue."

Nelson said the Legislature will present a balanced budget to the governor, but has only a few options left if SB 555 fails in the House.

"This is not the time to do draconian cuts in programs," he said. "I don't think our constituents want that. Everybody is feeling some pain and now is not the time."

With revenue measures "pretty much off the table," Nelson said lawmakers will have to rely on expiration of one-time monies, or money left in budgets from the previous year, and the Rainy Day Fund, which has $788 million after a withdrawal of $51 million to help balance the 2016 budget.

Neither Hall nor Nelson could guarantee the Legislature would have a budget at the end of the three-day special session the governor traditionally calls after the regular session concludes at midnight March 12.

During that week, House and Senate conferees meet to develop a budget from the two versions, agreeing to the document a line item at a time.

"The real question will be when we go into budget week and we know the revenue is not there to a certainty," Hall said. "Then where do we go? The only tools we have are budget cuts and the Rainy Day Fund."

Although Tomblin has used Rainy Day Funds to balance the budget in the past, including a bail-out of the 2016 budget, he's not in favor of more dips into the fund that keeps the state's high bond rating.

"Gov. Tomblin presented a balanced, structurally sound budget that used no money from the Rainy Day Fund, and he has discussed that plan with legislative leaders for months," said Tomblin Communication Director Chris Stadelman. "They have consistently said they have a plan to balance the budget and fund PEIA, although they have not shared details of their plan."

Stadelman said the state is facing serious budget challenges, and Tomblin believes we must seriously consider new revenues.

"Gov. Tomblin has no plans to raid our state’s savings account because the Legislature lacks consensus on the best way to balance the budget,"Stadelman said, "and he has made clear to the Legislature that he is opposed to taking large sums from the Rainy Day Fund to cover ongoing expenses."

Nelson said they are combatting a "structural imbalance that has come about in under six months." That's because of a decline in the coal industry's production, low natural gas prices, layoffs from both industries and a commensurate slump in consumer sales and service tax and personal income tax. He said the Legislature cannot change the budget's structure in 60 days, but doesn't know if a brief special session will reveal any new paths unless revenue measures are attached to some bill that gets revived on the last night.

"How long does (budget week) take? I can't answer that," he said. "We were very quick last year, but last year's budget had something for everybody. Right now our trend is, unfortunately, going south."

Can it get worse?

"I think there is always that possibility," Nelson responded.

Will it get worse?

"With these trends, right now I'm concerned," he said.

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West Virginia Center on Budget and Policy analyst Sean O'Leary said Gov. Earl Ray Tomblin's approach was "fairly balanced" and for the first time in years offered a revenue increase, instead of just budget cuts.

"We've significantly cut almost every other area of the budget outside of Medicaid," O'Leary said. "Every major department is spending less money in FY 17 in the governor's proposal than we did in FY 12."

He said the governor's budget did propose more cuts "in areas that were going to be painful," all in all, a balanced approach.

"That's what it's going to take to balance a budget," O'Leary said. "If we continue to cut the budget, then next year we cut the budget again and again and again and those revenues never come back."

O'Leary said his agency recommends the cigarette tax at $1.55 to raise $130 million and in the long run reduce health care costs, as people are discouraged from smoking. The WVCBP also favors broadening the base of the sales tax to include professional services including attorney, accountant and architect fees, among others, while also lowering the rate.

Sales taxes are normally regressive and hurt more low-income people because they spend a greater share of their income on sales tax than do more affluent people.

O'Leary said the state's budget is a reflection of the state's priorities.

"You want a budget that supports what we like to call a shared prosperity so everyone benefits, so everyone grows together, so we build a better future," he said. "That means you invest in your children, you invest in your workforce and you invest in your infrastructure. When you invest in those three things, you build a solid foundation of economic growth."

The WVCBP has recommended an Earned Income Tax Credit to help low-income families with children go to work and reduce the need for state assistance.

"(The EITC) has long-lasting benefits for children of parents who receive the tax credits," he said. "Those children are more likely to go to college, earn more as adults, and the list goes on. That's a worthwhile investment to make us a more attractive place to raise a family, a more attractive place to do business and a more attractive place to call home."