CHARLESTON, W.Va. — House Speaker Tim Armstead says big cuts — and some additional budgetary maneuvers — will have to be how state leaders deal with a state budget gap of about $500 million.
Armstead, talking with reporters in his office at the Capitol today, described significant cuts plus additional possibilities of refinancing debt related to pensions, sweeping accounts and dipping again into the state Rainy Day fund.
Armstead again said he and most other legislators in the Republican majority would be averse to raising taxes to fill the enormous budget gap — but he said several times the Legislature could look at closing tax exemptions.
“At this point, the appetite that has been reflected to me has been that they want to look at cutting government,” Armstead said of his fellow GOP delegates. “I’m not going to say nothing can change over the next 60 days. That’s the mood of the Legislature right now.
He added, “I can’t exclude anything at this point but I don’t see an appetite for tax increases.”
That will mean cuts, and they’ll be difficult, Armstead said.
“We agree with the governor that the people of West Virginia are taxed too heavily now,” he said. “It means there are going to have to be cuts. There’s no way to avoid that. Those cuts are not going to be easy and they’re not going to be mild. We are continuing those discussions with the governor’s office.”
Armstead spoke with reporters for more than an hour about state issues, particularly the budget. He said legislative leaders have met a couple of times in person with new Gov. Jim Justice in addition to a telephone conversation and communications with Justice’s chief of staff Nick Casey.
Casey, appearing Monday on “Talkline” with Hoppy Kercheval, said the governor would be considering a range of cuts from $390 million to $606 million to fill the budget gap.
“We agree with the governor that the people of West Virginia are taxed too heavily now,” Armstead said Thursday. “It means there are going to have to be cuts. There’s no way to avoid that. Those cuts are not going to be easy and they’re not going to be mild. We are continuing those discussions with the governor’s office.”
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Armstead said there are some tactics he called “big picture items” that could help balance the budget.
“We need to look at our pensions and the payments going into our pensions,” he said. “There are ways we can perhaps refinance those to save the state money — and perhaps significant money.”
Using a portion of the Rainy Day fund also could alleviate some of the cutting, Armstead said. State leaders do have to weigh how bond rating companies view such a maneuver and how their view might affect the rate at which the state can borrow.
“We’re not talking about delving in and solving this whole problem with that,” Armstead said. “But we will look at what proposed cuts are given to us by the governor. We are going to pick up on some of the proposed cuts we came up with last summer and talk about what the impact would be.
“What I think will occur will be those areas where we think he greatest harm might come from cuts we’ll see what we can backfill with Rainy Day to avoid the most extreme of those cuts.”
Armstead said the shape of the cuts will evolve over the next 60 days.
“Today can I tell you where those cuts will come from? I can’t.”
He said he’s glad the governor’s office seems prepared to take the first steps toward cutting.
“We don’t have all of the information the governor may have about how each of those agencies work,” Armstead said. “If we, as a Legislature, say to certain agencies ‘We need you to tell us the best way to cut 5 percent,’ some of those agencies are going to say ‘I don’t want to cut that 5 percent, so I’m going to tell you the cuts in a way that will seem the most harmful so you do’t cut it.’
“If the governor says to you, ‘I need you to find a way to cut 5 percent,’ you’re going to find the least harmful way. I do think there is a responsibility by the governor to be able to go back to his cabinet secretaries and say ‘work with me.’ Once that’s done and he provides us, as a Legislature, we’ll need to look at those as well, and we’ll have different opinions about what might hurt a different area. There might be a cut that would hurt a different area more than another. So it’s sort of a collective process that’s going to take place over the next 60 days.”
The Legislature could seek savings by folding entire agencies in with one another, Armstead said. He said such moves made during the regular legislative session give lawmakers greater flexibility than they would have during a special budget session.
“We can pass a bill to restructure things. We can pass a bill to eliminate an agency. I think what we’re looking at are some structural changes,” he said.
He predicted laws will need to be changed to address parts of the general revenue fund that the Legislature has not been able to touch because the spending has already been set by statute.
“We cannot continue to simply carve off little parts of the budget and say we can’t touch those,” Armstead said. “When we’re looking at a roughly $4 billion general revenue budget, you cannot make the cuts that are necessary if you carve off DHHR and education. You can’t do it. We’re going to have to look at those areas.”
Here’s a visual representation of the 2017 state budget in millions of dollars. The tiny block in the lower right-hand corner representing transportation is just what comes out of the general fund; the bulk of state funding for transportation comes out of the state Road Fund.
He said he’s spoken with officials in local school systems who’ve said they could make do with less money if they just had more flexibility.
“We have a very specific school aid formula that is very directive with how each dollar can be spent,” Armstead said. “We have some limitations on being able to alter that formula when it comes to how that money is divided up by counties. If superintendents have that flexibility they can live with less without causing harm to our education system.”
Armstead believes the same is true for the Department of Health and Human Resources.
“I’ve had a brief conversation with our new DHHR secretary; they’re looking very carefully at duplication, areas they can work with less,” Armstead said. “We’re going to dig into areas we haven’t dug into before.”
He also said the state might stop doing some tasks if there’s a private alternative.
“Any area where the state is basically competing with the private sector, I think those are where we start,” Armstead said. “I think those are areas where we can take a look and might be able to privatize functions that the people of the state of West Virginia may still benefit — but not part of our budget.”