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Justice’s optimism on reaching WV budget pact fading


Charleston Gazette-Mail

CHARLESTON, W.Va. — With five days left in the West Virginia Legislature’s 2017 session, the moves are accelerating in the chess match that is the state budget process, with all indications at the moment that the game will end in a stalemate.

Gov. Jim Justice, center, speaks during his budget summit Monday with more than 20 state leaders including, from left, Chamber of Commerce President Steve Roberts, AFL-CIO President Josh Sword and Mike Clowser, executive director of the Contractors Association.
(Photo by Chris Dorst)

The Senate, in Finance Committee Monday, unveiled a 2017-18 state budget plan that does not raise any taxes, but makes major cuts to public education, higher education, and health care programs to cut spending to $4.102 billion, a reduction of more than $160 million from the current general revenue budget, and about $340 million less than the governor’s budget proposal.

“In a millisecond,” Gov. Jim Justice said Monday when asked if he would veto that budget proposal.

“If it comes back, I’ll veto it again,” Justice said, during a media event showcasing support of state business, labor, education and tourism leaders who back his budget plan. “That’s why I said, everybody get your sleeping bags, and let’s buckle down.”

The Senate budget would make spending cuts that Justice has said would put the state in a “death spiral.”

It includes $50 million of cuts to higher education — 15 percent cuts for each college and university; $76.6 million of cuts to public education, to be made up with pending legislation requiring counties to increase property tax rates; and $47.7 million in cuts to the Department of Health and Human Resources, including about $3.7 million in cuts to waiver programs that fund in-home care for individuals with developmental disabilities and for the elderly.

“Though these cuts we’re going to effect providers, we’re going to effect children, we’re going to effect families, we’re going to effect the economy,” Sen. Jeff Mullins, R-Raleigh, said of the proposed budget.

Senate Majority Leader Ryan Ferns, R-Ohio, said the budget plan was based on feedback leadership had received from members of the Senate Republican caucus.

“We felt the best approach to take was producing a budget that wouldn’t increase taxes on the people of West Virginia,” Ferns said.

“We don’t need to be this regressive or primitive in our thinking,” Justice said of the Senate budget plan. “Frankly, I think these people are committing political suicide.”

Justice’s “Standing With Jim” rally came a week after Justice told reporters he was optimistic a budget deal would get done — optimism, he said, has since faded.

“I thought we were really close, but we’re not, and we’re getting ready to do something that is about as silly as silly can be,” he said Monday.

During the hour-long event, Justice was joined by nearly two dozen state leaders who support the governor’s plan, which includes about $224 million of tax increases that he said is spread out over business, consumers, and the wealthy.

State Chamber of Commerce President Steve Roberts said business wants to be part of the solution to the state’s budget crisis, and considers Justice’s proposed .045 percent gross receipts tax to be the best alternative to raise revenue.

“We don’t expect a free ride. We expect a fair ride,” Roberts said.

Beside Roberts was state AFL-CIO President Josh Sword, who said the Justice plan does not shift the tax burden to working families.

“Everybody seems to have some skin in the game in the governor’s solution,” Sword said, adding, “I proudly sit here with Gov. Jim Justice today in support of the governor’s proposal.”

During the rally, Justice was also critical of a plan unveiled Monday in House Finance Committee to raise about $138 in new tax revenue, a plan amended into a Senate bill that would end an annual transfer of about $11.7 million a year of tax dollars into the state Road Fund (SB 484).

The plan is the latest of several legislative proposals this session to raise revenue by eliminating sales tax exemptions on various goods and services.

The House Finance proposal would tax telecommunications services, including cellphone and landline services, to raise $60 million a year. West Virginia is one of about 10 states that currently do not tax those services. It also would tax direct business use of intrastate transportation and communications services to raise $54 million, and personal care services to raise $4.7 million.

Unlike previous proposals offered up in both house, which would lower or eliminate state income taxes, the plan advanced Monday does not change income tax rates. At $1.9 billion a year, income taxes are the largest single source of tax collections.

“This is a tax, and they’re hiding it. They want to say, we didn’t raise a tax, we just took off an exemption,” said Justice, who said elimination of some of the direct use tax exemptions for businesses will amount to “doubling down” taxes on manufacturers and contractors.

“Why are we wasting time doing that, and why in the world would we come up with this crazy a proposal that’s incomplete with five days left in the session?” Justice asked.

“To my mind, discussions have been ongoing to have a vehicle to work with right now,” House Finance Chairman Eric Nelson, R-Kanawha, said of the current proposal — and Justice’s objections to the plan.

Elimination of that tax exemption for personal services, affecting hair salons, barbers, skin and nail salons, and non-medical personal care, raised a number of questions in committee, leading Delegate Larry Rowe, D-Kanawha, to propose an amendment to remove personal services from the bill.

“This would be an imposition on them. A lot of these are very small businesses,” he said of collecting and remitting sales taxes. Rowe’s amendment was rejected on a voice vote.

The committee was divided over the bill, with two Republicans — Jim Butler and Marty Gearheart, of Mason and Mercer, respectively — joining committee Democrats in opposing it on a 13-11 roll call vote.

“Broadening the base is just slick politicians’ words for taxing everything under the sun,” Delegate Isaac Sponaugle, D-Pendleton, said in opposing the plan.

“Our tax structure is pushing people and jobs away from our state,” countered Committee Vice Chairman Eric Householder, R-Berkeley. “We’re actually going to cut taxes for struggling West Virginians.

As originally drafted, the committee amendment would lower the state sales tax rate to 5.5 percent on July 1, 2018, and would drop .25 percent each until reaching 4.75 percent as of July 1, 2021.

While the tax plan would raise about $138 million in new taxes in the coming budget year, Deputy Revenue Secretary Mark Muchow said the proposal would decrease tax collections beginning in 2019, leveling out at a $130 million a year loss of revenue, beginning in 2021.

Committee members hastily amended the bill setting triggers so that tax rate reductions only happen after the 2018-19 budget year if sales tax collections in the prior year exceeded 2016-17 collections, expected to total about $1.28 billion.

Last week, the Senate passed a much broader bill, raising the state sales tax to 7 percent, and repealing a much wider range of tax exemptions for a number of personal and professional services, to raise a total of $450 million a year. That bill (SB 409) also would lower income taxes and cut severance taxes on coal and natural gas, but has not been taken up by the House.

The 2017 regular session of the Legislature ends at midnight Saturday.

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