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Legislature takes second hiatus as July 1 shutdown looms

By PHIL KABLER

Charleston Gazette-Mail

CHARLESTON, W.Va. — With the Senate and House of Delegates still seemingly miles apart on how to raise revenue to close a $260 million gap in the 2017-18 state budget, the Legislature agreed Wednesday to put the special session on a second hiatus — to June 5 — to allow time to try to work with Gov. Jim Justice to come up with a compromise.

The Legislature agreed Wednesday to put the special session on a second hiatus to allow time to try to work with Gov. Jim Justice on a budge compromise.
(File photo by Chris Dorst)

The action Wednesday evening brought the 10th day of the special session on the 2017-18 budget to a dramatic conclusion, as Senate and House leadership continued to refuse to budge from their respective revenue plans.

Senate President Mitch Carmichael, R-Jackson, said the second break — the Legislature initially met May 4-5 before breaking to May 15 — will give Justice a chance to see if he can bring all sides to the table to come up with an agreement.

“It’s an effort to give an opportunity for the governor to get involved,” Carmichael said. “He was very adamant he wanted to get involved.”

Earlier Wednesday, along a mostly party line 18-13 vote, the Senate again passed its revenue plan, which would lower income taxes by 20 percent over two years and give a $50 million a year tax break to the coal industry, but would raise the state sales tax by 21 percent to make up for the some of lost tax revenue (House Bill 107).

The House of Delegates — where leadership has adamantly opposed what is now a 7.25 percent sales tax increase, as well as the proposed income tax rollbacks — sent a strong message of opposition Wednesday evening with an 85-0 vote to refuse to concur in the latest version of the Senate plan.

“It’s the huge increase in the sales tax that bothers me the most with what they did,” House Majority Leader Daryl Cowles, R-Morgan, in making the motion to refuse the Senate changes.

That leaves a wide chasm between the House and Senate on a revenue bill that was seemingly headed to a House-Senate conference committee.

During a lengthy Senate floor debate on the revenue bill, proponents called the Senate proposal an opportunity to turn around the state economy, while opponents warned it is a huge gamble that could lead the state to financial catastrophe.

It advanced, despite opposition from all 12 Senate Democrats, along with Sen. Randy Smith, R-Tucker.

“We’re going to gamble that we’re going to grow our economy, have these additional resources, and not have a national recession,” said Sen. Mike Romano, D-Harrison, adding, “My God, if it goes the other way, we’re headed for disaster.”

Romano said the income tax cuts mirror failed attempts at “trickle down” economics of the past.

“Give to the rich, and they’ll create jobs for everyone. It hasn’t worked at the national level and it won’t work in West Virginia,” he said.

Sen. Robert Karnes, R-Upshur, the lead architect of the plan, called fiscal notes from the state Department of Revenue projecting that the plan will result in revenue shortfalls each year after 2017-18 budget year as being “very pessimistic.” He said the numbers are unrealistic, failing to account for the economic growth he believes the income tax cuts will spur.

“I don’t expect that hole to be anywhere near that size, if there’s a hole at all,” he said of projected deficits growing from $121 million in 2018-19 to $178 million by 2021-22.

At one point, Karnes drew gasps when he suggested the state could deal with potential cuts in federal Medicaid funding by not paying for “transgender surgeries.”

Advocating for the plan, Senate Judiciary Chairman Charlie Trump, R-Morgan, said, “The status quo in West Virginia is simply not good enough. We have to take some bold, decisive action.”

In a break with protocol, Karnes explained the latest version of Senate amendment to the House bill on the Senate floor, instead of Senate Finance Chairman Mike Hall, R-Putnam.

Under questioning from Senate Democrats, Hall said it’s no secret he has had reservations with the Senate plan.

“I’ve expressed concern with whether it will work,” he said, but said meetings with Justice have given him encouragement that the plan, along with the governor’s major road-building initiative, could spark the needed economic stimulus to offset the lost income tax revenue.

“I’ve been persuaded to warm up a little bit to it,” Hall said of the plan.

“I would like to see a stable, structurally sound budget for two to three years going forward in anything we do,” Hall said.

Opponents said raising sales taxes to partially make up for lost revenue from income tax cuts amounts to shifting tax burden from upper-class to middle- and lower-class West Virginians, something Senate Republicans, including Sen. Ed Gaunch, R-Kanawha, disputed.

“The truth is, this is not an undue burden on lower- and middle-class people,” he said, adding, “This is not the horrible hole-making plan that people make it out to be.”

Senate Minority Leader Roman Prezioso, D-Marion, again attempted to restore the bill to the version that left the House — with no income tax cuts, and about $100 million a year of new revenue primarily from closing some current sales tax exemptions — along with a sales tax increase to 6.5 percent, to help close the $150 million budget gap that the House plan leaves in the 2017-18 budget.

“Three-quarters of the people of this Legislature agree more with this plan than the plan the Senate leadership proposes,” Prezioso said, referring to the House’s bipartisan 74-17 vote Friday in support of the House version of the bill.

Prezioso’s proposal was rejected by an 11-20 margin.

When the Legislature returns June 5, it will have just 25 days left before the new budget year begins on July 1.

Meanwhile, a bill that would allow state employees to be furloughed, in order to maintain benefits including health coverage in the event of a state government shutdown on July 1, was left pending in Senate Judiciary Committee.

After 10 days and an estimated cost of $306,000, the Legislature left the Capitol having passed one bill, which extends a fund used to subsidize Workers’ Compensation premium payments for volunteer fire departments through June 30, 2020 (SB 1010).

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