State making its way to better days, state revenue secretary says

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State making its way to better days, state revenue secretary says

CHARLESTON — In spite of budget cuts and using Rainy Day Funds, Secretary of Revenue Bob Kiss said Wednesday that the state is heading toward better days.
“Two years down the road we are anticipating a surplus,” Kiss said. “We are getting there.”

Gov. Earl Ray Tomblin’s budget lacks $151 million between revenues and expenditures, numbers he plans to make up with a dip into the state’s Rainy Day Fund and $72 million in targeted budget cuts. Tomblin announced Tuesday that the state’s investments had better than expected returns of $44 million, reducing the amount he planned to take from the Rainy Day Fund to $24 million.

Kiss said those budget cuts are not permanent.

For now though, those targeted cuts will affect Primary Care Support, which is reduced $3.6 million, Health Right Free Clinics, reduced $2.1 million, and Local Economic Development Assistance, $1.9 million, according to West Virginia Center for Budget and Policy executive director Ted Boettner.

Boettner said Family Resource Networks, Domestic Violence Programs and Child Advocacy Centers will also see between 8.5 and 13.3 percent budget cuts this year.
Senate Minority Leader Jeff Kessler, D-Marshall, said a cigarette tax increase is the cure for the state’s budget ills.

“It would give us $50 to $60 million,” Kessler said. “It’s an easy one; it’s hard to argue with. Had we done that last year we wouldn’t have borrowed a dime out of the Rainy Day Fund.”

“I don’t know how you can cut yourself into prosperity,” he said.

The Minority Leader said an increased tax on cigarettes could also be positive for workers’ health.

Last year, Medical Daily reported that 28 percent of Mountain State residents smoked. “Maybe it’s no coincidence that West Virginia has the high percentage of smokers and is ranked in the bottom five for the least expensive cigarettes at $5.07 per pack,” the report said.

West Virginia also has the lowest rate of worker participation in the nation, with only 54 percent of adults at work.

Kessler said the state needs to up the ante in workforce participation instead of using tax cuts to attract businesses.

“People create jobs not because we give them tax breaks or tax credits,” he said. “I don’t know that that’s been empirically proven.”

Personal Income Tax is the state’s leading budget booster and a dwindling workforce will have the same effect on the state budget.

“That means people have to be working to create income,” Kessler said.

Boettner said major tax cuts have hurt the state’s budget by $425 million. Over the last several years, the state has abolished the tax on groceries and the business franchise tax.

Instead of tax cuts, Boettner said state businesses need customers, thus the state needs a growing middle class.

Boettner said to create a strong strong middle class the state should:
• Invest in Early Childhood Programs (e.g. Home Visiting, Child Care, Birth to Three) : “The long-term economic benefit of high-quality early childhood programs in West Virginia is estimated at $5.20 for each dollar invested.” – West Virginia Early Childhood Planning Taskforce
• Enact a Refundable State Earned Income Tax Credit (EITC): Evidence shows it increases labor force participation and helps children by improving their health, college attendance, school achievement, and increases their earnings when they reach adulthood.
• Provide Free In-State Tuition: For less than the cost of the business tax cuts, West Virginia could provide free in-state tuition at 4-year and 2-year colleges.
• Invest in Workforce Training: Customized job training that assists people with the basic skills sought by local employers have been shown to produce substantial payoff.
Still, Kiss, Kessler and Sen. Finance Chairman Mike Hall, R- Putnam, said they would stand behind the cuts.
“I think it was good policy and good politics,” Kessler said.
Hall said putting that $400 million back into the public may have shown up in other tax revenue line items such as consumer sales tax.
“I doubt they squirreled it away; they probably spent it,” he said.