By RUSTY MARKS
The State Journal
CHARLESTON, W.Va. — West Virginia Gov. Jim Justice presented a budget proposal during his State of the State address that includes both further budget cuts and increases in taxes and fees.
In a largely off-the-cuff speech liberally peppered with humor and self-deprecation, Justice said spending cuts alone won’t be enough to dig the state out of the biggest fiscal hole it’s been in since the Great Depression.
“It’s time for gigantic decisions,” Justice said.
Justice said strong measures are needed to turn the state around, and said lawmakers can’t keep cutting to balance the budget.
“You’re faced with a $500 million hole in the bucket,” he said. “The next year it’s going to be $700 million.
“Are you willing to eliminate all our state parks? Are you willing to cut all our state colleges and universities except for WVU and Marshall?”
Justice said the kind of spending cuts necessary to make up for a $500 million deficit would mean eliminating services for seniors and veterans, which would leave the state barren.
“What’s West Virginia going to become?” he asked. “A nuclear waste site?”
Lawmakers must figure out how to plug a $123 million hole in the budget that ends June 30 and come up with a way to make up for a projected $500 million budget shortfall for the 2017-2018 fiscal year.
Justice proposes one last raid of the rainy-day fund to fill the $123 million deficit in the current fiscal year, after which he does not intend to rely on rainy-day money, staff members said.
Justice’s budget proposal for the next fiscal year includes $26.6 million in new budget cuts — Justice rounded the figure up in his speech to about $30 million.
His budget proposal also includes more than $450 million in new revenue measures that include raising the state sales tax by 0.5 a percent, eliminating sales tax exemptions on professional services and advertising, creating a 0.2 percent commercial activities tax on gross revenue from business earnings and raising wholesale taxes on beer and liquor.
The total tax increase is the largest proposed by a governor since Gov. Gaston Caperton called for a $92 million increase in 1989.
Justice’s budget also would eliminate general revenue fund contributions to the State Road Fund, repeal the state’s film tax credit and redirect 75 percent of the money set aside to pay off old workers’ compensation debts for next year. Justice administration members said the money would not go to the fund dedicated to retirement plan, and would go back to full funding the following year.
Justice also proposes a $2.4 billion road and bridge program that would use money from raising Division of Motor Vehicles licensing fees, increasing the tolls on the West Virginia Turnpike from $2 to $3 and raising the state gasoline tax by 10 cents a gallon to pay for road-building bonds.
But he also held out the possibility of charging state residents an $8 annual fee through the DMV that would exempt residents from paying road tolls. He said 77 percent of people who pay turnpike tolls are traveling through West Virginia from other states.
Justice also proposes giving a 2 percent pay raise to classroom teachers, at a cost of about $21 million, and setting aside $105 million in general fund revenue for economic development and infrastructure investment. The money would be outside the various road bonds and could be used for things like matching federal infrastructure grants, staff members said.
Justice also has an “alternative budget” plan he has created in the event the Legislature does not approve his recommended budget.
Republican leaders in both the House of Delegates and Senate are not keen on new taxes.
“While I think there are areas where we can work with Gov. Justice, specifically with relation to cutting red tape and reforming our education system, I’m disappointed in his proposals to solve our state’s budget crisis,” said House Speaker Tim Armstead, R-Kanawha.
“We had hoped that this governor would live up to his campaign promises of restructuring government and not putting additional tax burdens on our citizens, and to hear his proposal to balance our budget almost entirely with tax increases was a significant disappointment,” Armstead said. “While we want to work with the governor to solve this budget crisis, I do not believe the approach he presented tonight is something this Legislature – or the voters who elected us – will support.”
But Justice said if lawmakers come together, they can solve the state’s budget crisis.
“I’m telling you, if you don’t do this, you’re dead,” he said. “We have got to find a way to not completely kill the patient.”