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Justice proposes cuts, taxes to balance WV budget


The Herald-Dispatch

CHARLESTON, W.Va. — West Virginia Gov. Jim Justice on Wednesday proposed a combination of budget cuts, tax increases and reforms and potential bonding measures with the goal of balancing the Mountain State’s budget and, with the support of the 83rd West Virginia Legislature, initiate highway improvement projects throughout the state.

In his first State of the State address as the 36th governor of West Virginia, Justice, a Democrat, outlined his plan to make $26.6 million in cuts and create $450.15 million in revenue from tax increases and reforms to fill an estimated $500 million hole for fiscal year 2018, which begins July 1, 2017.

Justice also proposed a “one more” withdrawal of an estimated $123 million from the state’s Rainy Day Fund to balance the budget for the current fiscal year, based on the support of the GOP-majority Legislature.

 If West Virginia fails to reach for new solutions like he’s offering and does nothing new, then it’s inviting a bad fate, Justice told a Capitol chamber packed with lawmakers, other officials and guests.

“I always thought that if you got caught by Frankenstein, you deserve to die,” he said.

His proposed budget would increase to about $4.8 billion from general revenues. Total spending, including federal and other dedicated funds, would be about $12.9 billion.

Justice, a 65-year-old businessman who owns coal mines, farms and The Greenbrier resort, would set aside $105 million for state economic development and infrastructure investment. That would be an “SOS” fund intended to help save the state whose economy has been depressed with a sharp downturn in coal mining and related employment and taxes. He also called for a 2 percent pay raise for classroom teachers.

Prior to Justice’s address, members of his administration hosted a budget information session with members of the media from throughout the state to outline Justice’s budget proposals.

Secretary of Revenue Dave Hardy led the presentation, saying Justice and staff opted to go line by line through the budget and select what entities would be proposed to experience cuts instead of doing across-the-board cuts throughout all state agencies.

Cuts to state agencies

The cuts proposed by Justice will affect how much money each entity receives from the state’s general revenue fund, and special funds and federal funds provided to them aren’t expected to be affected, Hardy said.

Marshall University and West Virginia University are proposed to experience 4.4 percent cuts to their budgets, with all other cuts representing 100 percent of general revenue funding provided to the affected entities.

In terms of real dollars, WVU and the Educational Broadcasting Authority would be the hardest hit, with WVU being cut by $5.9 million and the EBA cut by $4.6 million.

Marshall University would experience a $2.8 million cut, Hardy said.

The other affected agencies are 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.

‘Responsible revenue enhancements’

The second tier of Justice’s plan includes what Hardy called “responsible revenue enhancements,” which include new taxes, tax reform and the reallocation of certain state dollars expected to generate an additional $450.15 million in revenue for the state in the next fiscal year.

Justice proposed a 0.5 percent increase to the state’s sales tax, estimated to bring in an additional $92.7 million in revenue, and a 0.2 percent tax on commercial gross revenues, which he said could sunset in three years.

Justice also proposed an elimination of sales tax exemptions for advertising and professional services, like legal counsel and accounting, which was expected to generate $87.6 million. Republican legislative leaders voiced support for the elimination of sales tax exemptions in the days leading up to the legislative session.

Justice wants to cut general revenue contributions to the State Road Fund, worth about $11.7 million. Under Justice’s proposal, money for the Road Fund would be replenished with funds raised in his proposed highway program.

The highway program includes raising DMV fees from $30 to $50, a $1 toll increase on the West Virginia Turnpike and raising the excise tax on gasoline by 10 cents per gallon. The current gas tax is 20.5 cents per gallon.

His plans also include 45 highway projects across the state with $1.4 billion in bonding, or even twice that, over 15 to 20 years, most of which would require voter approval. He said the projects would create tens of thousands of jobs.

Another proposal was the creation of a Commercial Activities Tax on businesses in the state. The tax would be two-tenths of 1 percent of a business’s annual gross revenue.

Another of Justice’s revenue proposals is one that he wouldn’t need legislative support to complete, Hardy said.

Justice proposed raising the wholesale liquor markup from 28 percent to 32 percent, which he could do through an administrative order to the West Virginia Alcohol Beverage Control Administration. That act is estimated to generate $2.8 million.

Justice also proposed raising the beer barrel tax from $5.50 to $8, estimated to bring in $2.8 million, to fund tourism promotion.

Justice also proposed repealing the state’s film tax credit, which was estimated to have minimal impact in fiscal year 2018 and save the state $3 million in future years.

Finally, the governor proposed a one-time redirect of $38 million from the state’s Worker’s Comp Debt Fund Revenue into the general revenue fund. That amount accounts for about three-fourths of the fund, and the state’s retirement plan would not be affected under the governor’s proposal.

The Worker’s Comp Debt Fund hasn’t been subject to any new claims since 2006, Hardy said, and between 60 and 80 worker’s comp files against the state are closed each month.

Justice will need the support of the Republican-controlled Legislature for many of his proposals. Its leaders have advocated government cuts to help close the budget gap and eliminating certain sales tax exemptions.

“In terms of just general tax increases on a people that are already overtaxed, that’s going to find a difficult reception in the Legislature,” Carmichael said.

The Associated Press contributed to this report.

Gov. Jim Justice’s 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

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