The Times West Virginian

West Virginia

March 11, 2014

State’s budget tapping reserves

Election year seen as major reason tax hikes off the table

CHARLESTON — West Virginia lawmakers are ironing out kinks in an election-year budget that avoids tax hikes and gives public workers raises.

But before statehouse leaders can tout the positives, they’ll begrudgingly look to dig into millions of dollars in savings.

A dreary budget picture looms over the 2014 midterm elections in the House of Delegates, where Democrats hold a slim six-seat edge over Republicans. In West Virginia’s traditionally Democratic Legislature, Republicans haven’t controlled the House since 1928.

House Speaker Tim Miley, D-Harrison, said election-year timing plays a prominent role in delegates’ overwhelming opposition to increasing the cigarette tax, sales tax or other levies. All of the chamber’s 100 members are up for re-election.

“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,” Miley told reporters last month.

Democrats enjoy a wider majority in the Senate, where President Jeff Kessler, D-Marshall, endorsed a $1 bump to the state’s 55-cent tax on cigarettes.

Almost all lawmakers, however, voted this session to award $1,000 pay raises for teachers and 2 percent boosts for school service personnel. Officials say starting teacher salaries need to be more competitive with West Virginia’s neighboring states.

Gov. Earl Ray Tomblin’s plan would also give state workers a $504 raise.

Lawmakers are looking to balance those spending boosts with the $922 million Rainy Day Fund. The last-resort account is considered one of the country’s strongest, and lawmakers haven’t used it to fill a budget hole before.

The House and Tomblin agree on using $83.8 million from the fund to balance the budget, like the law requires. The Senate is willing to take $125 million. The shortfall after February stood at $64 million, said House Finance Committee Chairman Brent Boggs, D-Braxton.

Top Senate budget lawmaker Roman Prezioso, D-Marion, says once the state taps $200 million from the fund, bond ratings could be in jeopardy.

“It gives me a lot of heartburn,” said Sen. Roman Prezioso, D-Marion and Finance Committee chairman. “We worked so hard to put those savings accounts aside, not only for a rainy day, but obviously to enhance our bond ratings.”

Lawmakers face a variety of struggles to make the numbers work. Revenue from dog and horse track casinos has dipped because of competition from surrounding states. Taxes on the booming natural gas industry haven’t offset the struggles of coal, the state’s longtime staple product.

Other problems are self-inflicted, lawmakers say. A recent cut on grocery taxes, tax credit on alternative fuel vehicles and a drop in the corporate income tax have eliminated millions of dollars in revenue. Officials say the alternative fuel credit for cars could cost the state $100 million.

Tomblin’s budget calls for 7.5 percent cuts across most state agencies, but many programs are shielded by the state constitution or case law. Prezioso said colleges and universities are about the only big unprotected budget areas to free up cash. Tomblin has suggested a 3.75 percent cut to higher education that doesn’t affect grants.

Lawmakers also have to clean up a $39 million budget cut bill that didn’t pass in the 60-day session that ended Saturday. The proposal would cut subsidies for greyhound and horse racing casinos and take $20 million from future water and sewer projects, among other cuts.

The House and Senate also found money for a tax break at the Greenbrier resort. With $2.5 million in state credits a year over 10 years, Greenbrier plans to pump $400 million into a few projects, including a new medical center, Senate President Kessler said. The initiatives would yield hundreds, if not thousands of jobs, Kessler said.

 

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