By PHIL KABLER
Charleston Gazette-Mail
CHARLESTON, W.Va. — After a 10-day recess, the special session on the 2017-18 state budget resumes Monday, in much the same posture as when legislators left the Capitol on May 5: With the Senate and Justice administration in general agreement on a revenue plan, but with the House of Delegates leadership unconvinced.
(File photo by Sam Owens)
Justice officials and legislators met throughout last week, including a meeting Friday stretching from mid-afternoon into the evening.
Throughout the week, Justice officials and Senate leaders tweaked the revenue plan that the Senate passed May 5 on a 32-1 vote.
That proposal called for an increase in the state sales tax from 6 percent to 7 percent, along with the elimination of some tax exemptions, to raise about $260 million a year, revenue that would help offset a nearly 20 percent cut in income tax rates championed by the Senate leadership, which would cost the state more than $380 million a year in lost revenue beginning in 2017.
The House soundly voted down the plan twice in two days, on largely party line votes, in a stand against any tax increases.
With tweaking, the latest proposal would spread out the initial income tax cuts over three years, allowing a scaling back of the sales tax increase to, at last negotiations, a 6.85 percent rate.
Senate President Mitch Carmichael, R-Jackson, said early Friday afternoon that plan was subject to further negotiations.
“I don’t think Tim’s on board,” he said, referring to House Speaker Tim Armstead, R-Kanawha.
House spokesman Jared Hunt said the lengthy meeting Friday in the governor’s office, which included Armstead and House leaders, was an encouraging sign.
Casey said the House leadership has been reluctant to support any increase in the sales tax, preferring instead to “broaden the base” by eliminating additional tax exemptions.
“If you ask Speaker Armstead, it would be how much he can come up over 6 percent,” Casey said, as opposed to looking at how much below a 7 percent sales tax is workable.
Another key is that Justice wants to immediately implement a 4.5-cent increase in the gas tax and increase various DMV fees to raise an additional $130 million a year for road construction and maintenance.
House leadership has said it first wants to see if state voters approve a Constitutional amendment authorizing the sale of road bonds, under a resolution adopted in the regular session, before approving the revenue increases, which ultimately would be used to underwrite the bonds.
Casey said the road funding is an integral part of Justice’s overall plan to grow the economy, and said waiting until after the road bond vote would cost the state much-needed funding for roadwork.
“We’ve got to have the roads as an economic driver for whole thing to work,” he said, saying the plan relies on the economic growth from the estimated 48,000 road construction jobs the road bonds would create to offset cuts in income tax collections.
Without the new economic growth, the plan becomes unworkable, Casey said.
“I don’t want to say Kansas-like,” he said.
Kansas has been a case study for critics of the so-called Senate/Justice compromise. Kansas sharply cut its income tax rates, but those cuts failed to generate the expected economic growth, creating major budget deficits in that state.
Casey said the Legislature also needs to be focused, not only on a looming July 1 deadline to get a budget bill enacted to avoid a government shutdown, but the reality that state government needs additional revenue to be able to continue to provide needed programs and services.
“The abyss we’re standing on the edge of is oblivion financially,” he said. “It’s a matter of insolvency.”
Casey echoed statements of former Revenue Secretary Bob Kiss, who before leaving office warned that state finances have a “significant structural hole” that must be corrected to avoid major ongoing budget deficits each year.
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