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Justice: 2019 budget hole could be $700 million

By ANDREA LANNOM

Times West Virginian

BECKLEY, W.Va. — With the state’s budget deficit expected to reach more than $700 million in the 2019 fiscal year, Gov. Jim Justice said he hopes to find a way to staunch the bleeding — but said it will take time.

Justice spoke to lawmakers and business owners at the Beckley-Raleigh County Chamber of Commerce’s legislative luncheon at Black Knight Country Club. Before the governor’s remarks, attendees split off into informal groups, discussing various issues that could come up in the legislative session, which begins Feb. 8, including tolls, the state’s drug epidemic and the budget.

“First and foremost, the depression is beyond belief,” Justice told attendees. “That’s where we are, like it or not. We may have bright spots right here in Beckley, but there are so many black holes that are just unbelievable.”

Comparing the state’s situation to a bleeding patient, he told attendees that “if you think we’re in bad shape, you just don’t have an earthly clue what bad really is.”

“It’s going to take a while,” Justice said. “It’s going to take a while. There are opportunities in agriculture, opportunities in tourism. All of these will take a while. We have a patient lying there and blood is shooting to the ceiling. All in the world we can do is trim the toenails. Blood is shooting to the ceiling. We’ve got to do something.”

Nick Casey, Justice’s chief of staff, previously told The Register-Herald that the governor’s economists are forecasting that West Virginia’s budgetary indicators are the worst since the Great Depression.

In an interview after his speech, Justice said the budget deficit for the 2018 fiscal year is expected to be $500 million and is expected to climb to more than $700 million in the 2019 fiscal year.

“Here’s the problem,” he said. “Many of the low-hanging fruit, we’ve already taken. The other thing we’ve done is we’ve taken $400 million out of the Rainy Day Fund and it only had $1 billion in it. … If we deplete the Rainy Day Fund significantly lower than it is, then you’re absolutely going to screw up your bond rating. You’re going to screw up everything. All your lending is going to go haywire.”

During Wednesday’s event, he mentioned several topics he wants to focus on during his time in office including cutting government agencies, especially those in education, and tiering severance tax for coal and natural gas.

“There are agencies in government that have money and there are agencies in government that are so blooming wasteful that it’s just unbelievable,” he said. “People are running government wrong. We’ve got to glean off all that we can glean off, then address what in the world we are going to do. Are we going to raise revenue? Are we going to do whatever we’ve got to do? It is dire, dire, dire. It is really bad. I don’t mean kind of bad. It is really bad.”

One of the measures previous Gov. Earl Ray Tomblin implemented was the 2 percent-across-the-board mid-year cut to West Virginia agencies. Justice said even if he would do these types of cuts, it wouldn’t get the budget where it needs to be.

“Do you realize what you would have to do to get where you need to be? You would have to cut people across the board 10 percent,” Justice said. “It would be an astronomical undertaking … if we continue to do what we’ve done in the past and look at approaches to fixing it like we have in the past, then we’re dead. We are. For real. I’m telling you, we’ve got to have new ideas.”

Justice said there are ways to raise $225 million. One of the fixes he called is putting money in a bundle and matching it with federal dollars. Over a period of time, Justice mentioned 25 years, he said that number would turn into $1.6 billion. However he did not elaborate from where that initial $225 million would come.

“If I had this, had that obligation, we could put into a financial instrument to take over as a bond or sold it directly to Wall Street and let them present a value and give me a check, they will give us a check for $1.6 billion. We’ve got to do it while interest rates are low. We will take that $1.6 billion and marry that with the federal matching dollars. If we do that on a 2-1 basis, I think it takes $3.3 billion to do every highway project on the books today — every one of them.”

In Justice’s inaugural address, he mentioned his desire to eliminate “a bunch of unnecessary agencies,” in education. Previously, Casey had mentioned specifically the Regional Education Support Agencies, Office of Education Performance Audits, Center for Professional Development and the School Board Associations.

“I’m talking about the state Education Department, RESAs, all agencies everywhere, putting education back into local hands,” Justice said. “I stood at inauguration and said I had a plan. All I’m doing with that plan is circulating it very cautiously internally.”

Justice said there are “agencies on top of agencies on top of agencies that are not doing a bit of good.”

“We’ve taken all control out of the local hands and believe we can run it so much better from Charleston,” he said. “What do we do? If we are running it great, then say pour it on, but we’re dead last. We’ve proven how to be 50th. What are we doing? We have to take it on. We have to eliminate – not cut back, eliminate.”

Justice reiterated an inaugural address theme, saying teachers are “grossly underpaid.”

Justice had mentioned in his inaugural address of “tiering” severance tax for natural gas and coal. He explained that the state currently has a flat 5 percent tax and it has been proposed to lower severance tax to 2 percent, which Justice said he opposes.

“Here is the deal. What I’m going to say is if it’s $35 a ton, we as a state realize you’re hurting. As coal goes to $55 a ton where you’re making money, I want it to be at 5 percent. These are hypothetical prices and this is steam coal. I would like to get 6.5 percent.”

The tiering would go all the way to 10 percent if prices go up to $200, he said.

“The coal operators have lost so much money. That’s bad for people, bad for companies, bad for stockholders. There have been bankruptcies declared. It’s catastrophic, but if you look to the future to a good day, a day when we hope coal is selling for $150 to $200 a ton, it gets to those levels, instead of 5 percent, you pay 10 percent and at that level, you’re bringing the state hundreds and hundreds of millions of dollars.

“In so many ways, West Virginia has become like a third-world country,” Justice later said. “Our resources, whether timber, oil, gas – our resources have left and we still remain 50th. I don’t want that. I don’t want to hurt our companies. I want to stand with them and help them when things are bad but as things get phenomenally good, they need to contribute to us in climbing out of this hole.”

He stressed that if nothing is done, the only remaining option is to take more money out of the Rainy Day Fund.

“Then, we will face the same dilemma, if not worse, the next year,” Justice said. “In a very short order, we will run out of money. People better realize that there is only one way and that is new ideas. We may have to bite the bullet and have revenue raises in certain areas, but if you look at it through my eyes, it’s just a challenge that I really believe we can do. If you look at it through the eyes of the past, then we’re dead but I’m very optimistic.”

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