How Governor Justice came up with his first budget

CHARLESTON, W.Va. — Gov. Jim Justice’s administration produced an ‘alternative budget‘ that included $450 million in cuts to state agencies in programs, but Justice says he didn’t spend a lot of time considering whether that’s an option he would have been willing to take.

“Not very much,” Justice said during a conversation with reporters in his office at the state Capitol.

Once that much is cut from state government, he said, it can no longer function well enough to improve people’s lives.

If that’s the case, he said, “We might as well go grouse hunting or be with our families because it’s over.”

Instead, Justice chose advancing $450 million in “revenue enhancements,” based largely on new or increased taxes. His plan would not only fill the upcoming fiscal budget gap but would also provide average 2 percent pay raises for classroom teachers and set aside $105 million in additional spending for infrastructure and economic development.

There were few signals that Justice’s budget plan would lean so heavily on taxes and only about $26 million on cuts.

During the campaign last fall, Justice said a rebound for met coal and a related bump in severance taxes or a federal subsidy for the timber industry — matters largely out of the governor’s hands — could provide budgetary relief.

“The alternative is cut, cut, cut or tax, tax, tax — and I don’t believe in either of those,” he said in the Oct. 11 debate.

On Dec. 15, as Justice’s transition teams met to start working on policy, a reporter asked if he still thought he could balance the budget without raising taxes.

“You never say never, no matter what the situation might be,” Justice responded. “But I believe with all my soul, yes, I can do it.”

A couple of weeks ago, Justice’s chief of staff, Nick Casey, said he would show the governor options ranging from $390 million to $606 million in cuts.

The Republican majority in the Legislature, perhaps with some gamesmanship, had been praising Justice for an approach that they perceived as being heavier on cuts than taxes.

By Thursday, speaking from his office at the Capitol, Justice said that as he had greater access to the state’s budget figures, his understanding improved and his position evolved.

“You don’t have access to what you now have access to,” he said. I said, “I want to look at the books from top to bottom.'”

During a House Finance Committee meeting on Thursday morning, state budget director Mike McKown said that over the course of his first few weeks in office, Justice was presented budget scenarios heavier on cuts and others heavier on tax hikes.

“There was a lot of agony in those meetings,” McKown said.

A six-year outlook for West Virginia’s budget picture particularly impressed the state’s circumstances on Justice, McKown said.

“This opened his eyes.”

Once he looked at the options, he said, he couldn’t see cutting state government to that point that it could no longer serve citizens or boost the economy.

He instead laid out a vision of using the tools of state government — potentially enhanced tools if his tax increases go through — to rev the economy through a variety of means, especially pumped up highways construction.

“We’re dying. We may already be dead,” Justice said from a leather chair behind a big wooden desk in his new office at the Capitol. Behind him were the West Virginia and American flags and a mounted, wooden version of the state seal.

Justice said viewing the state’s finances just as a matter of balancing the budget misses the bigger picture.

“Is the sole objective balancing the budget? Then you’re not thinking right. We have to have a way to grow.”

Much of the new revenue in Justice’s budget would come from a new gross revenue tax on businesses of two-tenths of a percent. That accounts for an estimated $214 million.

Another $92 million would come from raising the consumer sales tax by a half percent. And another $87 million would come from eliminating tax exemptions for professional services and advertising, an initiative that’s already getting opposition from affected groups.

To Justice’s mind, that mix meant a variety of West Virginians would be contributing more to the state’s needs.

“I think our businesses would be willing to step up. I think our people would be willing to step up,” Justice said.

This headline includes information to the contrary: Chamber chief says $300 million in business taxes would be hard to swallow.

Justice is particularly enthusiastic about proposals to increase highway construction funding, which would be accomplished by hiking fees at the Division of Motor Vehicles and increasing highway tolls and then leveraging that cash flow through bonding.

“Just imagine if the roads were fixed, if Corridor H were done, if the Coalfields Expressway were done and all our highways,” Justice said.

Generating big ideas and the willingness to move forward with them is his job, Justice said.

“This is what you have voted me in as your governor to do.”

He added, “You have put me in position to do my job.”

Justice is already getting pushback from the Republican majority in the Legislature. Right after the State of the State address, House Speaker Tim Armstead put out a statement expressing dismay.

“We had hoped that this Governor would live up to his campaign promises of restructuring government and not putting additional tax burdens on our citizens, and to hear his proposal to balance our budget almost entirely with tax increases was a significant disappointment,” Armstead stated.

Members of the House Finance Committee dove into the first steps toward producing their own budget during two meetings Thursday. Comments about what Justice had presented were subdued but members questioned some aspects of his thought process.

House Majority Leader Daryl Cowles wondered about the big gap between Justice’s budget that leans so heavily on tax hikes and the “alternative budget” that presents $450 million in cuts.

“Is there a third that’s somewhere between these two?” Cowles asked.

“No,” budget director McKown said.

“Thank you,” Cowles responded.

House Finance chairman Eric Nelson, after his committee had met twice, said he had no idea what Justice would propose before he actually heard it with his own ears. Now, Nelson said, the Legislature has to react.

“I had no advance knowledge of anything that was said last night,” Nelson said.

“We’re going to get into this and really see what else we can do. What hadn’t been spoken of is, there’s an extra hundred million dollars in this budget for something called ‘Save our State,’ which is brand new expenditures. And we just need to dig in a bit more.”

Nelson said last year’s budget process presents some lessons for what could happen now.

“I think you can look back to last year and the difficulties we had in any revenue measure. We have many of the same members in place. I think you’ve listened to our leaders in both chambers who believe there are greater cuts within this budget.

“I think realistically, we’ve got to look at the whole gamut. Are our agencies being run efficiently? Are there areas of consolidation? He gave everyone a list of $450 million in cuts and you saw how severe some of that was. So, we’re going to look at everything. But the tide is to put more of a burden on our citizens right now.”

From his office, Justice said he’s not looking for a fight.

“I hope we don’t get into a situation where we’re at odds with one another,” he said.

But he also predicted the Legislature will have trouble coming up with a budget built on hundreds of millions in cuts.

“At the end of the rainbow, they don’t have the guts to go that way,” he said.

And, he said, his budget is the only course that really takes the future into account.

“People can criticize all day long,” he said. “I am giving you the most painless pathway out you can imagine. If you don’t do this, we have lost our minds.”

He concluded, “There is no other way.”

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