The Times West Virginian

West Virginia

February 21, 2014

West Virginia lawmakers are struggling to get budget deal

Proposals to raise cigarette, sales, other taxes have fallen flat

CHARLESTON — After proposals to raise cigarette, sales or other taxes fell flat Thursday, West Virginia lawmakers will likely have to bear down for more budget cuts and dig deeper into state reserves next year.

Speaker Tim Miley, D-Harrison, said after hearing from his Democratic caucus in a closed meeting Thursday that tax increases don’t have the support needed in the House of Delegates.

Miley said there was little desire to raise the cigarette tax. Senate President Jeff Kessler offered the increase Thursday to fill a hole in next year’s $4.3 billion budget. Sen. Roman Prezioso, D-Marion and Finance Committee chairman, said the cigarette tax hike would have added $118 million in revenue.

House Democrats were also hesitant to support raising the sales tax by 1 percent, which would generate $200 million for the next budget.

Miley said the concern for House Democrats had a lot to do with looming 2014 elections. Democrats are also trying to protect a slight advantage in the House.

“Let’s just be frank. We are in a political arena where people run for election and they want to satisfy their constituents back home,” Miley said. “There is always some fear, by all elected officials at all levels, wondering whether the constituents back home will support them if they vote in favor of any tax increase.”

Kessler, D-Marshall, said the budget could rely on more cuts without more sources of tax revenue.

“So it’s back to slashing and cutting or borrowing more money from the ‘rainy day’ fund,” he said.

Gov. Earl Ray Tomblin’s budget proposal already would tap into $84 million from state reserves known as the rainy day fund. At about $915 million, the last-resort pot is considered one of the nation’s best.

Miley said the state could look to take out up to $200 million from the fund.

On Tuesday, Tomblin said it’s a tight line to walk when taking money out of the reserves.

“You get below that area of where the Wall Street people want you to be, you run the risk of having a bond downgrade,” Tomblin said.

West Virginia requires its state budget to balance. Miley said there was some consternation, however, that the governor’s budget balanced only if several other bills passed.

A Senate committee killed two of the items: One transferring $13 million from roads to general revenue and one that would have held back $4.7 million from a railroads fund. Another Tomblin-supported bill to take $40 million from the lottery fund has stalled.

Miley said the House could consider a scaled-back version of the lottery money bill.

Sen. Bill Laird, D-Fayette and a Financial Committee member, said lawmakers are in for two tough budget years. But projections improve after that.

“We have to be careful about protecting our reserve as best we can,” Laird said. “The challenge for us is going to be the next two years. By 2017 we should begin to see improvements in the state’s economy overall.”

Raises for teachers and state workers, however, are still in budget plans. Miley said some members have expressed heartburn over giving raises in a tight budget year. The latest raise would include an extra $1,000 a year for each teacher.

“If we’re going to place a priority on education as we say we want to, you have to have competitive salaries for starting teachers,” Miley said.

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