CHARLESTON, W.Va. — Gov. Jim Justice suggested a new way to close West Virginia’s upcoming half-billion budget gap.
Justice announced his new plan today along with Revenue Secretary Dave Hardy. Justice said he worked on the plan Sunday and then called Hardy and Chief of Staff Nick Casey at 10 p.m. for their help refining it.
“It’s not like I’m changing horses in the middle of the stream. I’m just coming up with alternatives while the other side is sitting and coming with … I haven’t seen anything.”
During his State of the State address on Feb. 8, Justice originally proposed $26 million in cuts and an estimated $450 million in increased revenue, including the establishment of a commercial activities tax.
His new proposal, which the administration said would be presented in the form of an amended bill, still includes the $26 million in cuts. But Justice said he would be willing to accept $50 million more in cuts if the Legislature presents some he could live with.
“If they can come up with $50 million, I’m all in,” he said. “I think it’s going to be hard to do.”
In a joint statement, Senate President Mitch Carmichael and House Speaker Tim Armstead say they are glad the governor has shown he is willing to adjust.
“We’re glad the Governor has heard the concerns of our constituents with his initial proposals and are heartened to know he is open to alternatives,” the two legislative leaders stated.
“We also agree that additional cuts of $50 million or more are needed, and we are carefully evaluating various options for significant cuts. We hope the Governor will continue to work with us on these and other ideas to close our budget gap.”
As has become his habit, the governor drew his proposals on dry erase boards with markers.
“It’s a different pathway, isn’t it?” pic.twitter.com/qJjEAPzMlW
— Brad McElhinny (@BradMcElhinny) February 27, 2017
Justice’s new tax proposal begins with two tax increases he described as also leading to better health.
- Imposes a 1-cent tax per ounce on “sugary drinks,” raising an estimated $85 million.
- Raises the cigarette tax by another 50 cents a pack, for an estimated $47.8 million more. Last year, the Legislature raised the cigarette tax from 65 cents to $1.20 a pack to bridge the budget gap.
The second segment would raise taxes on residents making more than $200,000 by $500, those making more than $250,000 by $750 and those making more than $300,000 by $1,000 into his Save Our State fund for development and infrastructure. He says that provides $8 million. It was unclear the method for paying that tax.
“I think we ought to all be all in,” Justice said.
The governor says he would divide his proposed $105 million Save Our State fund among three years, making it only $35 million for the coming year. So that’s $70 million less for the coming year than Justice originally proposed.
Justice suggested “smoothing” the state’s teacher pension fund, which in essence would apply a four-year average to debt payments rather than being subject to the rise and fall of each year’s investments. He says that could provide an additional $40.75 million.
Armstead and Carmichael said they approve of that strategy: “Some of the ideas he brought up today – such as the smoothing proposal with the Teacher’s Retirement System – are suggestions we brought to the table during our meetings with the administration,” they stated.
Justice says he would be willing to roll back his proposed gross receipts tax on businesses from the originally-suggested 0.2 percent to 0.075 percent. That raises $80.4 million, he said. “So basically, this almost becomes next to nothing,” he said.
“Why even have it all? If I’m John Doe and I’m paying more on my sales tax, I want everyone to be in.”
Justice would increase the consumer sales tax from 6 percent to 6.25 percent, raising an estimated $46.5 million.
He would impose a sales tax on professional services, raising an estimated $78.9 million. The governor said he would keep an exemption on advertising services, estimated to bee $5.4 million.
“The word that you get out, taxing that might not be the right answer,” Justice said of advertising.
Justice’s budget had originally included — and still does — an increase of $5.50 to $8 on the beer barrel tax for $2.8 million, an increase from 28 percent to 32 percent on the wholesale liquor tax for $2.8 million, a one-time pause on paying down the state’s workers comp debt to save $38 million, stopping general revenue subsidies to the state Road Fund for an estimated $11.7 million and one-time use of general revenue and Lottery surplus for $30.9 million.
The governor’s proposal also includes $121,989,723 “changes to anticipated expenditures,” an umbrella for the cuts he proposes but also taking into account some increased spending such as an average 2 percent payraise for classroom teachers.
That section attributes $52,500 in savings to “no across-the-board 2 percent raise” for state employees. Another big hunk of that section — $34,320,000 — is no increase in spending for the Public Employees Insurance Agency.
“All the other things basically stay in play,” Justice said. “The net-net basically gives you a $63 million surplus.”
The governor also adjusted some aspects of his roads plan that he says will create thousands of new jobs.
He reiterated his desire to provide an annual $8 EZ-Pass that would then provide free, in-state tolled highway access for West Virginia drivers.
Justice would raise Turnpike tolls to $4 for out-of-state drivers. He said the original $2 would stay to maintain the Turnpike but the extra $2 would be a revenue source for bonding for new highways projects.
He says he would raise DMV fees from $30 to $50, reducing the cycle for required state inspections to every three years. He says that’s a net effect of just $10.23 for people’s pocketbooks.
Justice would lower his proposed gas tax increase from 10 cents to 4.5 cents.
All of these increases, he proposes leveraging through bonding to raise a couple billion dollars for road and bridge construction and maintenance.
“Here’s another pathway,” Justice concluded.
Armstead and Carmichael said their houses will have their own budget proposals to present in short order.
“Like the Governor, we agree we need to think big to solve our budget crisis,” they stated.
“The Legislature has started work on major tax reform proposals that will spur economic growth. Members of our Finance committees are working diligently to review the Governor’s proposed budget to identify savings in each agency. We believe that their work with the Governor’s cabinet secretaries will yield additional ways to increase efficiencies and save taxpayers money.”