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Justice: ‘Didn’t like’ making state cuts, hates tax increases


The Herald-Dispatch

CHARLESTON, W.Va. — Whether or not he has the support of the members of the Republican-majority West Virginia Legislature, Democratic Gov. Jim Justice doubled down on his message Thursday that he was interested in making tough decisions and hearing additional ideas to balance the state’s budget and foster economic growth in the Mountain State.

In an invitation-only meeting with media outlets in his office Thursday afternoon, Justice provided a glimpse into his reasoning for proposing $26.6 million in targeted cuts to state-supported entities and $450.15 million in tax increases, reforms and other revenue enhancements to prevent the state from operating in a deficit in fiscal year 2018.

The state of West Virginia is projected to be about $500 million short on revenue for fiscal year 2018, which begins July 1, 2017. The state also is projected, as of Feb. 8, to be about $123 million short on revenue for the current fiscal year.

Justice has proposed supplementing the fiscal year 2017 shortfall only with Rainy Day Funds, saying he wanted it to be the last such withdrawal from the fund for a long time.

Justice told reporters that he “hated” raising taxes and he “didn’t like” a lot of the cuts he proposed, but he said they were tough decisions that had to keep the state out of a deficit.

The first question to Justice was whether he was expecting a fight from legislators on his proposal, and he responded by saying he “hoped to goodness” he didn’t end up at odds with legislators, but he felt that West Virginians couldn’t expect that patience alone would pay off in improving the state’s economy.

“The voters elected me to come up with solutions and to put our state on the pathway to prosperity,” Justice said. “That’s what they did. Now, I’ve given you a way to take this state off and not say, ‘Well, we’re going to get there in 20 years from today.’ People think, ‘Well, we’re waiting for things to get better.’ Is that not true? Well, things are better. Why can’t we understand? The stock market’s at 20,000. Things are better everywhere but here.”

Following Justice’s State of the State address on Wednesday, House of Delegates Speaker Tim Armstead, R-Kanawha, said it was unlikely House members would base the state’s budget on Justice’s proposed tax increases, and Senate President Mitch Carmichael, R-Jackson, said he was disappointed in the budget cuts and tax increase proposals.

In the past five years, legislators have cut $600 million from the state’s general revenue fund as the fund faced increasing budget shortfalls each year.

If no new forms of revenue are generated for the state this year, the budget shortfall for fiscal year 2019 is projected to be $700 million, Justice said Thursday.

He also provided some explanation as to how he and his staff determined $26.6 million in cuts from 10 state-supported entities: Marshall University, West Virginia University, Educational Broadcasting Authority, Regional Education Service Agencies, West Virginia Network, College Readiness Program, Division of Labor, Division of Culture and History, and the West Virginia Film Office. There also would be a reduction of money allocated for state vehicle purchases.

Justice’s predecessor, Earl Ray Tomblin, issued across-the-board cuts to state entities, with some exceptions to certain entities.

“The only reason I took money from WVU and Marshall is I think they can get by with that,” Justice said. “We have stripped higher ed. Higher ed has been a go-to place where, if we want money, we’ll just take it from higher ed. I think Marshall and WVU can stand it. I do not think our other institutions can, and I think our other institutions are important to us.”

Since fiscal year 2013, which ended June 30, 2013, Marshall has experienced $11.5 million in cuts from the state. The university has absorbed those cuts by increasing tuition, requiring an extra $3.8 million from students and their families and using $1.5 million from reserves.

University officials also have increased efficiency by eliminating 136 positions through attrition and retirement, mothballed Laidley Hall, eliminated low-demand programs and initiated energy efficiency measures throughout campus. Those efficiency initiatives have saved Marshall $6.8 million.

Support from the state accounts for about 20 percent of Marshall’s total budget.

When asked about cutting funding to the Educational Broadcasting Authority, which supports West Virginia Public Broadcasting, Justice said “he didn’t like that either,” and he repeatedly said he “hated” proposing tax increases after saying during his campaign he wanted to avoid doing just that.

Justice said the plan he proposed Wednesday “hurt everybody just a little bit.”

“When you’re able to see under the sheets and see all the books and see what the state of the budget is, you have to make a decision of this: That is either to draw in and constrict even more, which would be just basically shutting down the whole state,” he said. ” You got to find a way. You think, ‘Well, OK. We can raise the sales tax 3 percent, and that would be a way out,’ but what does that do for us? That in itself kind of kicks the can down the road.”

Proposed budget cuts and revenue enhancements

Proposed budget cuts*

  • Regional Education Service Agencies: $3.7 million
  • West Virginia University: $5.9 million
  • Marshall University: $2.8 million
  • West Virginia Network: $1.7 million
  • College Readiness Program: $155,000
  • Division of Labor: $2.7 million
  • Reduction in purchases of state vehicles: $369,000
  • Educational Broadcasting Authority: $4.6 million
  • Division of Culture and History: $4.3 million
  • Film Office: $341,000

Total cuts: $26.6 million

*Justice’s proposed cuts represent 4.4 percent cuts to general revenue funding for WVU and Marshall and 100 percent cuts in general revenue funding to the other entities. Any other special funds or federal funds for all entities aren’t immediately affected in Justice’s proposal.

Proposed revenue enhancements

  • Raise the sales tax .5 percent: $92.7 million
  • Eliminate sales tax exemptions for professional services and advertising: $87.6 million
  • Create a two-tenths of a percent commercial activities tax on gross revenues: $214.3 million
  • Raise the beer barrel tax from $5.50 to $8: $2.8 million (Justice proposed this money be allocated for tourism)
  • Raise wholesale liquor markup from 28 percent to 32 percent: $2.8 million
  • End general revenue subsidy to State Road Fund: $11.7 million**
  • Repeal film tax credit: Minimal impact expected in 2018, but $3 million expected in future years
  • One-time Worker’s Comp Debt Fund Revenue Redirect: $38 million

Total estimated revenue: $450.15 million

**In Justice’s proposal, support for the State Road Fund would be supplemented in his proposed highway program.

Source: West Virginia Secretary of Revenue Dave Hardy

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