By ANDREA LANNOM
CHARLESTON, W.Va. — As the days of the session winding down, both the House and Senate will have budget bills on third reading Wednesday.
Gov. Jim Justice has previously expressed fears a special session will be necessary to balance the budget. Senate President Mitch Carmichael expressed similar concerns, saying he fears the governor will veto any budget proposal presented.
However, Delegate Eric Nelson, R-Kanawha, who chairs the House Finance committee, said he thinks it’s premature to predict what will happen at this point, saying there is still a lot of work to be done from now until Saturday.
“I unfortunately believe that the governor will do what he said and veto the budget,” Carmichael said. “But people need to weigh in on this issue. It’s a necessary debate for this state to shape government. Should we impose an enormous tax increase on West Virginia as the governor wants to do to fund government or should we take modest cuts to various agencies and live within our means?”
Carmichael said the Senate’s budget proposal is a “monumental accomplishment for this legislative body to achieve.”
“It fundamentally reshapes government, adheres to the principal of living within our means,” Carmichael said. “It spends only what West Virginia will collect with its revenue without raising taxes and imposes a roughly 2.5 percent cut across all agencies in the state — 2.5 percent, in an era where our population has declined and our revenues have declined. We are able to deliver a budget that lives within our means, does not raise taxes and still provides the necessary services that government should provide.”
Cuts include about a 4 percent reduction to the West Virginia Department of Health and Human Resources and a roughly 15 percent cut to higher education and a cut to West Virginia Public Broadcasting.
Carmichael also mentioned Senate Bill 609, which would allow county boards of education to raise property taxes potentially up to 18 percent to make up for loss funding with public education. Proponents of this bill said the measure provides more flexibility to local school systems and wouldn’t amount to an increase if county boards decide to roll back the property tax rate to current levels.
The decisions were difficult, Carmichael said, but they were necessary to structurally balance the budget and for the goal of the state living within its means.
Nelson said the House’s budget is $4.24 billion, which is more than $70 million below the previous year. It keeps fairs and festivals and doesn’t cut the IDD waiver but does make a 5 percent reduction to higher education. It also cuts West Virginia Public Broadcasting by 20 percent.
Nelson said public education also has some minor cuts.
Nelson said the vote on an amendment to a tax reform bill was a critical vote for the budget proposal.
Under the amended version of Senate Bill 484, the sales tax rate would be lowered and certain exemptions would be eliminated.
By July 1, the rate would be lowered to 5.5 percent; 5.25 percent by 2019 and farther reduced to 4.25 percent if certain triggers are met using the 2017 tax year as a revenue base.
Some of the exemptions it would eliminate include telecommunications, the first $40,000 of contracting services, electronic data processing services, charges for memberships to health and fitness organizations and materials used in business activities on transportation other than the transportation of coal.
Proponents of the bill said that broadening the base and lowering the rate is a fair way for taxation and would ultimately end up as a tax cut.
However, opponents said it’s a tax increase and were concerned that revenue would decline in later years.
Delegate Eric Householder, R-Berkeley, said at the end of 2018, the state would capture $137 million and would drop to about $55 million the following year. He said the following year, it would drop to negative $15 million in revenue.
He noted this is not a revenue neutral approach and this revenue estimate is static and does not account or predict dynamic economic activity increases. He also said in his view, the bill would put West Virginia at a competitive advantage to surrounding states
Opponent Isaac Sponaugle, D-Pendleton, said it amounts to a tax increase.
“It taxes barbers, people performing massages, manicures, shoe shiners if the shoes are on your feet but if they’re not on your feet then it’s not, cab drivers, caretakers of the elderly. It’s taxing anything that possibly moves in the state of West Virginia. I don’t think neighboring states do that.”
Nelson said although the governor hasn’t been thrilled with the proposals from either side, delegates haven’t been receptive to Justice’s proposals either, especially raising consumer sales tax or the CAT tax.
“I’m feeling positive of where we are and that we have a balanced budget,” Nelson said. “There is something in there for many. It takes away from others because we don’t have the funding right now. I’m confident we can have the governor look at the product and hopefully sign off on this. I want to get something done. I don’t want to wait on a veto.”
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