Tomblin's budget includes no tax increases or pay raises

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By Phil Kabler

The Charleston Gazette

Gov. Earl Ray Tomblin proposed a $4.77 billion 2015-16 West Virginia budget Wednesday that includes no tax increases and essentially no pay raises for state or public school employees.

For the first time since the State Budget Office has prepared six-year budget projections, the proposed budget reduces spending in the state’s base budget by nearly $40 million.

The budget also calls for dipping into the Revenue Shortfall Reserve Funds, commonly called “Rainy Day” funds, for $68.6 million to balance the budget.

State Budget Office Director Mike McKown said that’s less than what government officials anticipated when they met with bond rating agencies in December.

“A month ago,” he said, “we told the rating agencies it would be in the $85 million range.”

The government took $100 million out of Rainy Day funds to balance the current budget but, even with the two reductions, the funds will still have nearly $800 million in reserve.

After back-to-back years of 7½ percent across-the-board budget cuts for state agencies, the new budget looks at directed cuts, Revenue Secretary Bob Kiss said, saying another round of across-the-board cuts would have been “devastating” for many agencies.

A large chunk of spending cuts are in government contributions to pension plans for state and public school employees, made possible because West Virginia’s Investment Management Board produced investment earnings on more than $13 billion of pension assets that far exceeded the required 7.5 percent annual return, Kiss said.

However, higher education — which was subject to a 5 percent across-the-board cut in the current budget year — will be hit with a nearly $12.2 million cut in general revenue appropriations under Tomblin’s proposed budget, a 2.5 percent cut.

The budget includes no pay raises, McKown said, with the exception of court-ordered salary hikes for staff members at the Mildred Mitchell Bateman and William R. Sharpe Jr. psychiatric hospitals.

A 2 percent pay increase for state and public school employees is projected for the 2016-17 budget, he said. Also, public school employees will receive annual increment pay increases as usual this budget year.

Tax collections have struggled to recover, first from the 2009 national recession, and, more recently, from what Deputy Revenue Secretary Mark Muchow called the “headwinds” of falling energy prices.

“We’ve been through several difficult years because of flat revenue collections,” McKown noted.

The budget might turn the corner in the 2016-17 budget year, in part because West Virginia is scheduled to pay off what was $4 billion of old Workers’ Compensation Fund liabilities, freeing up about $60 million a year in general revenue and eliminating special severance taxes and Workers’ Compensation employer premium surcharges approaching about $140 million a year, Kiss said.

Overall, Tomblin proposed a 2015-16 budget that spends nearly $4.77 billion in general revenue and Lottery profits. However, the actual cost of government operations in fiscal 2015-16 — including federal funding and special revenue accounts from various fees and charges — totals $22.71 billion.