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WV budget talks resume in special session

By PHIL KABLER

Charleston Gazette-Mail

CHARLESTON, W.Va. — After a 10-day break, West Virginia legislators resumed a special session on the budget Monday, with the Justice administration and Senate leadership tweaking a revenue plan in hopes of gaining support in the House of Delegates — which twice soundly rejected earlier versions of the bill.

Ultimately, both houses spent Monday waiting for the revised plan before recessing the third day of the special session until this morning.

With a partial state government shutdown looming in 46 days, Gov. Jim Justice’s chief of staff, Nick Casey, sent a memorandum Monday to state Cabinet secretaries, directing them to prepare contingency plans for continuing essential services after July 1 if no budget bill is passed.
West Virginia House Speaker Tim Armstead, R-Kanawha, and House Communications Director Jared Hunt leave the House of Delegates on Monday. Legislators have resumed a special session to draft a state budget.
(Photo by Kenny Kemp)

“In an abundance of caution, you need to start developing a contingency plan for all your agencies as to how to proceed should the budget not be in place to be effective on July 1, 2017,” Casey states in the memo.

“Your planning must identify essential and non-essential services,” the memo adds. “Some are clear, for instance, Corrections and appropriate housing of inmates are essential. There are, however, other services that are less clear and those need to be examined closely.”

In the memo, Casey requests that the contingency plans be submitted to the Governor’s Office by May 30, and notes that if the budget impasse is resolved before July 1, the exercise of classifying essential and non-essential services could help identify options for consolidating services and finding financial efficiencies in the future.

Also Monday, Justice amended the special session call to include legislation to allow him to furlough state employees in the event of a government shutdown. Justice called it an “employee protection bill.”

“We have to prepare for the worst-case scenario, and if that day comes I want to ensure all of our state workers are protected,” Justice said in a statement. “It’s not right for our state workforce to lose their health insurance coverage or see their benefits disappear on July 1 if there is no budget in place. This bill needs to pass in order to safeguard state employees.”

Under existing law, if the state government shuts down, public employees would effectively be terminated on July 1, and would have to be rehired once a new budget takes effect, potentially costing them health insurance coverage, seniority and other benefits.

On at least three occasions, including the past two regular sessions, the Legislature has declined to pass a furlough bill.

Chances for passage of the bill in special session took a hit Monday when House Speaker Tim Armstead, R-Kanawha, double-referenced the bill to the Government Organization and Judiciary committees, an unusual gauntlet for a bill in special session (House Bill 106). Government Organization is not scheduled to meet this morning.

In the past, state employee unions have objected that the legislation could allow administrations to require employees to take unpaid leave days to save money.

Much as it began on May 4, the resumption of the special session got off to a fitful start Monday, as both houses twice met briefly during the day, then recessed to today, awaiting the drafting of the latest Justice/Senate compromise on the revenue plan.

Senate President Mitch Carmichael, R-Jackson, said many of the tweaks in the latest version are intended to address objections House Republicans had to the earlier versions of the revenue bill.

“If they don’t like this plan, then what is it?” Carmichael said. “For those who want to say no, it’s incumbent on them to offer an alternative. Saying no is not an alternative.”

With some of the last-minute revisions in the bill taking longer than expected, the Senate called it a day shortly after 4 p.m. Monday, rather than waiting into the evening for the revised revenue plan to be introduced, he said.

In the House, Republicans were critical that they had spent all day waiting for the revenue plan to materialize.

“For whatever reason, that just hasn’t happened today,” House Majority Leader Daryl Cowles, R-Morgan, said.

Delegate Larry Rowe, D-Kanawha, countered that House Republicans had twice rejected earlier budget plans without giving them any consideration.

“The issue really before us is the revenue measures, what tax increases are we willing to vote for to support a budget?” he said.

Additionally, Delegate Frank Deem, R-Wood, and House Minority Leader Tim Miley, D-Harrison, called for bipartisan cooperation.

“Common sense and reason needs to be brought to the forefront of any budget we pass, and any revenue measures,” Miley said.

Some of the tweaks to the Justice/Senate revenue compromise being worked on Monday include:

Lowering a proposed increase in the consumer sales tax from 7 percent to 6.85 percent, while eliminating some existing sales tax exemptions on business-to-business transactions to make up the difference.

Phasing in a roughly 20 percent reduction in personal income tax rates over two years, to reduce the impact of lost revenue in the 2018-19 budget year.

Increasing the state privilege tax on motor vehicle purchases from 5 percent to 6 percent, providing $40 million for Justice’s road-building program. That would allow an equivalent reduction in proposed increases in state gas taxes to provide that funding, reducing the total increase to less than $60 million.

Eliminating a proposed temporary increase in the state corporate net tax from 6.5 percent to 8.5 percent that would have raised about $45 million a year.

Cowles said Monday he has doubts about whether the revised plan will garner much support among House Republicans.

He noted that only two members of the 64-member Republican caucus indicated support for the 7 percent sales tax, and said the 6.85 percent rate is probably not low enough to persuade others.

“I think there’s growing consensus for simplification,” Cowles said, referring to those who advocate dealing simply with the 2017-18 budget shortfall now, and addressing tax reform issues at a later date.

Critics of the Justice/Senate plan note that it closes the shortfall in the 2017-18 state budget only because the proposed tax increases would go into effect on July 1, six months before the income tax rate reductions would become effective on Jan. 1, 2018, but that it creates future deficits beginning in 2018-19.

“It underscores the fact that this is a tax cut,” Carmichael said of the revenue projections. “Secondly, it underscores the fact that this governor and this Legislature are invested in the growth these bills will produce with the roads package and the tax cuts.”

Carmichael said the plan is designed to avoid scenarios experienced in states, such as Kansas, where reductions in income tax rates caused massive budget deficits.

“In contrast to what some of these other states have done when they’ve made these tax cuts, we’re controlling government spending,” he said. “In inflation-adjusted numbers, this government will shrink.”

Monday marked the third day of the special session, at an estimated cost of $35,000 a day.

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