CHARLESTON, W.Va. — The state Senate could take a major step toward resolving the state’s budget battle today — or send the entire issue back to the whiteboard just days before what’s been described as the drop-dead date to be sure state worker paychecks may be processed.
Senators are set to vote during their noon floor session on a budget framework passed yesterday by the House of Delegates.
Meanwhile, Gov. Jim Justice called an 11 a.m. meeting with leaders of both parties and both houses to discuss the situation. Stakeholders from various West Virginia industries were invited too.
The governor was believed to be making one more pitch for personal income tax reductions to be included — in some form — in the budget framework. Doing so would require raising other taxes, which also might help leaders to avoid cuts.
Some of those in the meeting said the governor pitched one more framework for personal income tax reductions — an average 5 percent cut starting next year and then average 5 percent cuts the two years following that. An income tax increase to 6.5 percent would go along with that.
The governor is going to try “another attempt at changing the direction of our state and put our state on a new path,” Senate President Mitch Carmichael said today on MetroNews’ “Talkline.”
“We’re going to stand and try to help him do that.”
— MetroNews (@WVMetroNews) June 15, 2017
Carmichael told “Talkline” host Hoppy Kercheval that the Senate is willing to pass a budget that cuts to the level of the revenue available. But he said the preference among Republican senators continues to be a budget that includes the income tax cuts.
A budget plan without income tax reform would accomplish basic goals, Carmichael agreed. But he said it would not change West Virginia’s trajectory.
“You’ve balanced another budget another year, you’ve made some cuts — then yeah you’ve kicked the can down the road one more year,” said Carmichael, R-Jackson.
He added, “Incrementalism is many times the enemy of progress.”
Both the Senate and the House this week have passed $4.225 billion budgets requiring significant cuts to higher education and Medicaid funding, but there have been differences in the details.
A budget bill the state Senate passed on a party-line 22-12 vote on Tuesday night cut $33 million in state funding from the higher education system and $34 million in Medicaid funding. The Medicaid funding is subject to a 3-to-1 federal match, so that’s a $136 million overall cut to available healthcare funding.
The House bill has about $15 million in cuts for higher education and it uses a variety of diverted funding and surpluses to preserve most funding for Medicaid. A $12 million portion would come from a reserve in the state Senate.
Delegates amended their bill into the Senate’s, so that’s what senators will be voting on today.
Discussing the bill on Wednesday evening, Senate Majority Leader Ryan Ferns didn’t rule out voting in favor of what the House passed but he did raise two areas of concern.
Ferns said senators initially thought they would vote on the House’s bill Wednesday evening but delayed their decision to allow more time to study the ramifications.
“We were in hopes that it was something we could accept,” said Ferns, R-Ohio. “But I was basically outlining the reasons we couldn’t just accept that budget and pass it. There are some things that jump out at you.”
One is that the $4.225 billion budget figure was determined after the Justice administration revised revenue estimates for the coming fiscal year.
A big reason for the revised estimate is the administration’s belief that the state’s economic fortunes will improve because of an ambitious highways agenda. Although the Senate has passed the related highways funding bills, the House of Delegates has yet to do so.
“They’ve assumed $130 million from this revenue estimate increase that he clearly says is contingent upon passage of the roads bills,” Ferns said. “We included that in our budget because we actually passed those bills.
“They included it but they didn’t pass them. I’ve never really seen anything done like that before.”
Ferns also questioned the transfers and anticipated surpluses aimed at filling in Medicaid funding, calling those funding sources “one-time money.”
“This isn’t necessarily a reason to vote for or against the bill,” Ferns said. “Ultimately, it would get us a budget and a lot of people are concerned about the impending timeline for the government shutting down.”
Ferns questioned the use of surpluses and transfers to backfill Medicaid funding, though.
“But throughout the process of these conference committees, the things I’ve heard from them (delegates) is increasing fiscal stability. There are two ways of doing that: One is through revenue and the other is cuts,” Ferns said.
“Well, they didn’t want to do the cuts so they filled in with one-time money, which doesn’t create any structural stability. So that, to me, was a little contradictory from what I’ve been hearing from them.”
Senator Mike Romano, D-Harrison, stood and objected to similar remarks that Ferns had made on the Senate floor.
Romano said the budget process has turned cyclical with each house rejecting what the other has done.
“There is no plan B,” Romano said. “They rejected what we sent over. We’re about to reject what they sent over.
“We are playing with people’s lives. Get a budget done. Please, I implore you. This reduction of personal income tax, we’re never going to get it through over there.”
Speaking on Wednesday to reporters, Gov. Jim Justice cast doubt on whether he would accept a budget with significant cuts.
“You’ve got a really difficult situation, catastrophic situation, because we’re coming up on a deadline,” Justice said. “Then you’re going to have me faced with major cuts.
“Well, why are we doing that? Why are we hurting people when we don’t have to hurt them.”
For weeks Justice has advocated the Senate Republican proposal that would include personal income tax reductions. Up against resistance from Senate Democrats, House Democrats and House Republicans, the Senate Republicans abandoned that plan this week in favor of cuts.
Justice has continued to tout variations on the income tax reductions, floating an idea early this week that would have eliminated a tax cut for earnings over $300,000.
In the Wednesday interview, Justice continued to advance similar ideas.
“There’s another thing on the table and it’s just this — maybe we can just give everybody that’s paying taxes, we can give them $300 or $200 or something like that and give it to them in a rebate check to where they’ll really see it.
“I would be a super advocate of that right there. And give it to everybody except those that can make it without that — those making $250,000 and above. Their contribution is they’re stepping up to try to help West Virginia. Give the check to the middle-income and the lower-income and start us on the pathway to tax reform.
Justice concluded, “If we could get them to agree to it, that would give the Senate Rs the feeling that we’re on the pathway to tax reform.”
Ferns, speaking Wednesday evening, said Republicans would be less interested in income tax cuts that don’t give a break to top wage earners, who they believe are most likely to additional workers or invest in West Virginia’s economy.
But he said the interest in income tax cuts will remain.
“The door never closes on the possibility for tax reform. Even if the House and Senate pass a budget and send it downstairs to the governor, the door still hasn’t closed on that,” Ferns said.
“A week from now or a month from now if people think there are cuts in the budget that the state can’t afford to accept then we could potentially do tax reform and avoid those cuts, so the door never closes on that.”