By PHIL KABLER
Charleston Gazette-Mail
CHARLESTON, W.Va. — With Gov. Jim Justice’s attempts at brokering a compromise in apparent collapse, House and Senate leadership went back to their respective corners Tuesday with separate revenue proposals that each rely heavily on spending cuts to create a balanced 2017-18 West Virginia budget.
That potentially sets up a giant game of chicken, to see which side gives in to the other’s plan — plans involving either small or no tax increases to close the budget deficit.
With the House of Delegates balking at a proposal backed by Justice and Senate leadership to raise the state sales tax — but only in conjunction with a rollback of income taxes — the Senate’s fallback position as of Tuesday is to balance the budget entirely through spending cuts, with higher education and the Department of Health and Human Resources bearing the brunt of the cuts.
“We’re hopeful the House recognizes that either we’re going to do some tax reform components or we’re going to live within our means,” said Senate President Mitch Carmichael, R-Jackson.
House leadership is reverting to a version of the revenue plan its chamber passed on May 19, the seventh day of the special session, in a 74-19 vote. That plan includes no tax increases, per se, but “broadens the base” by eliminating some sales tax exemptions in existing law, the largest being for telecommunications services, such as cellphone plans.
That would raise about $86 million for the 2017-18 budget, but perks in the bill, including income tax exemptions for Social Security retirement and military pensions, an increased personal income tax deductible from $2,000 to $2,500 and expanded credits for historical-building rehabilitation, would cut the net revenue gain to about $67 million.
That would shrink a 2017-18 budget shortfall from about $180 million to a little more than $110 million, according to House Finance Chairman Eric Nelson, R-Kanawha.
Among the multiple revenue proposals considered to date, Nelson said the plan is the one “that has been front and center since we started” in the House.
“We have a budget that does have a deficiency right now, and this is a small step toward that,” he said.
House members of a House-Senate conference committee trying to come up with a compromise revenue plan on Tuesday morning offered that House revenue proposal as the conference committee report.
While the measure was adopted on a voice vote, the three Senate Republicans on the committee — Sens. Craig Blair, R-Berkeley; Ryan Ferns, R-Ohio; and Ed Gaunch, R-Kanawha — refused to sign the conference report, which effectively killed it, leaving the 10-member panel with nothing to show for six days of negotiations.
The three Republicans issued a statement later that said, “Without meaningful tax reform, the only option that remains is to pass a budget that spends only to the revenue line we are provided by the Governor, and make significant cuts to live within our means. Throughout this process, Senate Republicans have been more than willing to compromise on our position and to find an outcome that could benefit all West Virginians. Unfortunately, we do not believe the version of the bill considered in conference achieves that goal. With no option left on the table, we will move forward with passing a budget that lives strictly within our means.”
Justice’s press office did not respond Tuesday to a request for comment on the latest budget developments.
However, on Monday, when asked if he would veto the alternative House or Senate revenue plans, he said, “I would be really motivated to veto anything that would come to me that would hurt people.”
On April 14, he ceremoniously vetoed a budget bill passed in the waning moments of the regular session that would have cut state spending by $160 million — potentially less than the cuts that would be needed to balance the budget under the Senate’s “bare-bones” plan.
During an acrimonious House floor session Tuesday evening, in which Democrats accused leadership of doing nothing to resolve the budget impasse in 17 days of special session, House Speaker Tim Armstead, R-Kanawha, left the lectern to address the House, advising, “We’re going to get a budget, and we’re going to put people’s fear to rest, but there’s still work to be done.”
Despite the latest setback, Armstead said, progress is being made on the budget plan.
“We’ve had roadblock after roadblock after roadblock from our friends across the building, and we’ve had roadblocks, frankly, from downstairs,” he said, referring to the Senate chambers and the Governor’s Office, respectively.
Armstead said Senate leadership has been unwilling to abandon its proposal to lower income taxes, despite multiple votes in the House showing little to no support for the plan.
“I do not believe they have been willing to recognize there are certain things they want that are not going to happen,” said Armstead, who said he does not believe the income tax cuts have been fully vetted.
Last year, it took 17 days in special session to break an impasse over the 2016-17 budget, ending only when the House finally relented and passed legislation increasing state tobacco taxes by about $95 million a year.
That led to passage of the 2016-17 budget bill, and the conclusion of that special session, on June 14.
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