CHARLESTON, W.Va. — It’s the midway point of the 60-day legislative session, and legislative leaders say they should be able to announce consensus on their strategy to balance the state budget by the beginning of next week.
“No later than Monday,” Senate President Mitch Carmichael said today in an appearance on “Talkline” with Hoppy Kercheval. “The framework is in place now.”
That’s not quite soon enough for the Justice administration, which has placed a countdown clock outside the governor’s reception room and which was calling its own budget update today beside the budget clock.
“I’m waiting,” Gov. Jim Justice said at that appearance today. “We have no budget.”
All parties involved are under pressure to come up with a budget that copes with the estimated half-billion dollar budget shortfall for the coming fiscal year.
If the Legislature’s budget plan isn’t fully baked, it’s at least in the mixing bowl.
Leaders in the Republican majority in the Legislature have said their version of the budget will include significant cuts. Tightening the state’s belt is likely to be the basis for any framework put out by the Legislature, at least at first.
Carmichael and House Speaker Tim Armstead have emphasized that revenue estimates have been about $4.055 billion. They said that represents the roof on spending.
“That’s what we have to spend,” Carmichael said on “Talkline.” “We shouldn’t spend more than we have.”
But the budget is likely to also be an outgrowth of tax restructuring that’s being considered in both houses. One philosophy behind the tax reform, legislative leaders have said for months, would be to broaden the state’s sales tax, with the aim of eliminating exemptions.
“All of us recognize that over the years there has been exception after exception after exception,” Armstead, R-Kanawha, said in an interview today after the West Virginia Press Association’s annual legislative breakfast..
That strategy could open up renewed consideration of the state food tax, which was eliminated in 2013 — maybe bringing it back at a level of about 3 percent. It also could include eliminate a tax exemption on telecommunications, which former Gov. Earl Ray Tomblin, recommended as a way to raise $60 million to $70 million.
Legislative leaders have said those measures haven’t yet been under serious consideration, but they could be on the table once lawmakers have concluded realistic assessments of the needs of state agencies.
The food tax was a part of a tax package being considered by the state Senate’s Joint Committee on Tax Reform. The broader effort in that committee has been to do away with the state income tax and replace it with a higher, broader consumer sales tax.
The Senate’s tax reform committee had to go back to the drawing board when a fiscal note showed that its first plan would result in a revenue decline of $870 million over four years. But the committee said it would be back with a new plan in short order.
Meanwhile, leadership in the House of Delegates has two bills in the pipeline affecting taxes. One of the bills, expected to be out no later than Friday, would focus on broadening the sales tax and could include the tax on telecommunications as well as taxes on various services that hadn’t been taxed to this point.
Armstead, a longtime opponent of the state food tax, acknowledged that restoring it is being considered by others but he said he remains against doing so.
“Some people are looking at that. I don’t support that,” Armstead said today.
Armstead added, “One thing I think we have done to put money in the pockets of every single West Virginian is doing away with the sales tax on food.”
The other House bill would streamline the state income tax. House members were looking at options ranging from a single, 5-percent flat tax to a tiered system of five tax brackets.
In terms of cuts, legislative leaders said they want to start with some of Justice’s spending proposals that they say would put the state deeper in the budget hole. His $105 million “Save Our State” plan to boost infrastructure and development is on life support.
Legislators also say the state likely can’t afford Justice’s proposed 2-percent pay raise for classroom teachers, which the administration said would cost $21 million.
Other cuts could be ahead for state agencies. Those with the largest budgets include state K-12 education, the Division of Health and Human Resources and higher education.
“Yes, there will be cuts to those areas,” said Carmichael, R-Jackson, while appearing on “Talkline.” “We cannot avoid cuts to those programs.”
Carmichael suggested there could be cuts of 3 to 4 percent for higher education and no more than 5 percent for the state’s K-12 system.
Legislative leaders have said cuts to the education system could be more manageable if more flexibility is allowed at the local level.
At his appearance today beside the budget clock, Justice likened those kinds of cuts to taking scalps.
“We’re in real trouble and we don’t need to have scalps to say ‘Look what we did for y’all,'” Justice said.
There are other budget strategies in play that would be neither cuts nor tax measures.
Legislators are counting on the state Consolidated Public Retirement Board to allow “smoothing” of the state Teachers Pension Retirement System — basically smoothing out the peaks and valleys of annual payments — to save about $40 million next year.
Jeff Fleck, the executive director of the retirement board, confirmed via email that at its meeting Wednesday, the board “voted to implement the four-year smoothing funding method in TRS (consistent with the PERS plan). The impact for the FY18 budget would be a reduction in state contribution of $43.2 million.”
Much of the first 30 days of the session has been consumed with members of both house finance committees going over the budgets of state agencies.
Senate Finance Chairman Mike Hall said the process of talking with agencies about their budget needs might seem time-consuming from the outside but it’s a crucial step. Those budget meetings with agencies concluded this week.
“Some of the members as they looked at the budget for the first time are suddenly becoming aware that if you look at a higher ed line or a public ed line or a Medicaid line or a State Police line and say ‘Well, we’ve got to cut the budget back to what we’ve been given to spend,’ there’s an effect there,” Hall, R-Putnam, said in a Wednesday afternoon interview.
“So it slowed it down in terms of trying to get down to the spending level that’s appropriate. You give an agency X amount of dollars and they claim they need it and the governor put it in his bill – and you say maybe they can live with less; we don’t know. That’s kind of a group thing.”
Hall said he, like others, is eager to hear what the larger group thinks about the specifics of forming a budget.
“Right now, to be candid with you, I don’t have a clear answer as to where people are willing to go on that, particularly from the leadership,” Hall said Wednesday. “Obviously what we do and the House does, at a certain point, we’ll have to agree on. I don’t think there’s agreement yet on the revenue side.”
Senate Minority Leader Roman Prezioso, currently on the finance committee and a former chairman of the committee, agrees that much work has been done. But he doubts the Republican majority will be able to come up with the kind of cutting that has been described.
“I would assume that within this week or next week that they’re going to come out with a plan. It’s yet to be seen what they want to do. We all realize that we do have a funding gap. There’s no secret how to fix it. You’ve either got to raise taxes or cut the programs,” Prezioso, D-Marion, said on Wednesday.
“Senator Hall has done a really good job in letting all the agencies vet. He’s given members of the committee an opportunity to look at these budget. And I think he pretty well sees that we’re pretty well cut to the bone. It’s just a matter of what revenue enhancements we want to get together and a combination of some cuts that won’t amount to that much.”
Armstead said the process of reaching consensus has been detailed and deliberative, starting before the session even began.
In addition to going through the usual budget process through the finance committees in both houses, leadership and caucuses have been meeting regularly to iron out consensus on the major steps toward balancing the budget.
“It’s very close because we do have a framework, but we’ve got to talk with our members about that,” Armstead said.
Armstead said those involved in the regular discussions have been himself, Carmichael, the finance chairmen of both houses, both majority leaders and the education chairmen.
“All of those groups have gotten in the room almost every day, tweaking this,” Armstead said. “And we take it back to our caucuses and say this is what we’re looking at.”
He said there will be at least one more joint caucus before the Legislature is able to make a public presentation of its budget strategy.
“We’ll be doing a joint caucus either today or tomorrow and then by the first of next week we believe we’ll be able. If we go into that caucus and they say ‘Why don’t’ we look at this?’ then we might need to do that,” Armstead said.
At that point, Carmichael said, “The framework will be in place. It won’t be presented in a flimsy manner on a white board. However we present it is going to be first class.”
Legislators have said they’re actually much farther along in the process than normal. Carmichael said the budget will be ready more quickly than any Legislature in recent memory.
Justice said that’s not quick enough for his taste.
“If these people worked for me, they’d be in real trouble,” the governor said today.
Once the Legislature’s plan has made its public debut, it could be compared to the governor’s plan. Justice has said he’s flexible but isn’t willing to accept a budget that he believes would be detrimental to the state or its citizens.
“Hopefully it’ll be one he can sign,” Armstead said of the governor. “If he digs his feet into the sand and says I want $400 million in taxes, I don’t think we’re going to get there.”
But if the Legislature can’t reach an agreement on the budget within its own ranks before the 60-day session has ended, Justice is already thinking about what action he’ll take.
“I think I have the right to call ’em back in three days,” Justice said, while standing beside his budget clock. “We won’t be going home.”