New spending proposals and a tax cut on Governor Justice’s plate this year

CHARLESTON, W.Va. — Governor Jim Justice doesn’t plan to raise taxes, but he does want pay raises for teachers and other state employees, a boost to budgets for Commerce and Tourism, renewed maintenance on state assets, investment in a new State Trooper cadet class and a subsidy for community and technical education.

Besides all that, Justice proposes starting a multi-year phase-out of the property taxes paid by industrial companies.

All that is possible, the administration’s revenue staff says, because of a brighter outlook for state revenue.

Justice, in his State of the State address, described it a different way.

As a miracle.

Doubts from Democrats

Tim Miley

Democratic Party leaders gathered after the governor’s speech and said they support many of the spending initiatives — but they have serious doubts about whether the money is really there to pay for it all.

“The biggest concern I have was that just by saying something is so doesn’t make it real, doesn’t make it a fact, doesn’t make it a reality,” said House Minority Leader Tim Miley, D-Harrison.

Miley continued, “Last year we were driving a car that had four flat tires. We’re still in that same car, and it may only have two flat tires. It’s better off, but it’s still not a fully functioning vehicle.”

Big differences from last year

The governor’s budget priorities outlined in his State of the State address before lawmakers are significantly different from what he proposed last year when state officials were focused on steep budget shortfalls.

Last year, he proposed an estimated $26 million in cuts and an estimated $450 million in increased revenue, including the establishment of a commercial activities tax.

The governor and the Legislature fought over the budget the duration of the 60-day session, and Justice wound up vetoing what lawmakers proposed by unveiling a platter of bull excrement. The governor and lawmakers then sparred during a special session that lasted almost to the new fiscal year.

The budget picture has stabilized a bit because of rebounding markets for coal and natural gas.

State revenue officials say they are also filling budget gaps for the current fiscal year and the coming one by using millions of dollars the state had set targeted to fund Medicaid expenses that wound up not being as deep as expected.

The governor’s spending desires also have been curtailed compared to last year. Then, the administration proposed spending $21 million to provide average 2 percent pay raises for classroom teachers beyond their annual step raises. And the administration wanted to funnel $105 million into a “Save Our State Fund” for economic development and infrastructure investment.

What’s new

Justice still eyes some new spending in the coming year, though.

This time, the proposed average pay raise for teachers is 1 percent. That, combined with annual step raises, would land teachers a raise of about $1,000, revenue officials said.

Other state employees, who haven’t had raises during several lean budget years in a row, would get average 1 percent raises under the Justice budget proposal.

Corrections officials, whose low pay has resulted in ongoing turnover and heavy overtime, are in line for step raises of $2,000 a year over three years. The goal is to get newly-hired corrections officers to starting pay of $30,000 a year while also encouraging more experienced officers to stay.

Justice has spent two years describing the need to spend more on West Virginia’s economic development and tourism potential.

This year, he proposes investing an additional $35 million for the Department of Commerce to help the agency do more to attract new business to West Virginia.

Justice also proposes tripling funding for the Division of Tourism, bringing it to $20 million.

Dave Hardy

“The governor has made no bones about it,” said state Revenue Secretary Dave Hardy. “He thinks West Virginia needs to increase its investment to tourism.”

Justice also wants to pump money into social service programs, particularly those supporting foster children. The administration did not yet provide a monetary amount for this investment.

He wants to spend an additional $4 million for the first new State Trooper class in four years.

And the administration wants to devote about $7 million to subsidizing community and technical college education in West Virginia. Senate President Mitch Carmichael has spoken of free community college as a goal he’d like to achieve.

Finally, the governor wants to address the neglected infrastructure of West Virginia’s public buildings. That’s estimated as a $23 million expense.

“There’s a lot of neglected infrastructure,” Hardy said. “You can only defer maintenance so long.”

One tax cut

The Justice administration, like legislative leadership, wants to eliminate property taxes on industrial companies over time.

State development officials describe the tax as an impediment to growing and maintaining businesses in West Virginia.

The tax represents $134 million, but state officials aren’t proposing elimination all at once. Instead, they envision a 7-year phase-out. That’s step-downs of about $20 million a year.

There would also be a lag. Property taxes are embedded in the state Constitution so removing industrial inventory, machinery and equipment taxes would require a statewide vote on an amendment.

Doing so probably wouldn’t take place for months, so the best guess is the first tax cut would take place next fall. That would be several months into the fiscal year, so the full amount of the tax cut wouldn’t be felt.

Those taxes provide significant revenue for county governments and school boards. State officials propose making up the difference through West Virginia’s general fund.

Roman Prezioso

Senate Minority Leader Roman Prezioso expressed worry about state government’s ability to make up the money to counties.

“He wants to eliminate the inventory tax. He wants to make counties and boards of education whole. He’s got a tremendous lift he’s got to do,” said Prezioso, D-Marion. “I just don’t see how he can squander any more money out of this budget.”

How can they do all that?

There’s still a hole in the budget, both for the current fiscal year and for the coming one.

State officials say to close the gap this year they plan to use about $60 million in funding that had been set aside for Medicaid costs but that didn’t wind up having to be spent for that purpose.

For the coming fiscal year, they’ll do the same to the tune of $103 million.

Democrats described this maneuver as a raid, worrying that health providers may be shortchanged.

“We’re a state with the largest population base that gets the benefit of Medicaid funding for their healthcare benefits,” Miley said.

Another piece of the spending gap puzzle became clear earlier this week when the director of the state Consolidated Public Retirement Board announced that investment payoffs will reduce the amount the state has to pay into pension plans for the coming year by almost $33 million.

As for the rest, revenue officials are projecting about $130 million in increased revenue for the coming fiscal year, mostly because of the brightening energy sectors and increased construction activity.

The new spending is estimated to be in the ballpark of $130 million to $140 million.

Mike McKown

Mike McKown, the state budget director, acknowledged the situation is very different from recent years.

“We’ve been cutting and cutting,” he said. “We’ve held it down, and when you do that eventually revenues will catch up to you.”

Prezioso, the Senate minority leader, continued to advise caution.

“He’s got a long way to go to do everything he’s proposed without raising any revenues,” Prezioso said.

“My question to (Justice) would be, what happened in the last 11 months that turned this state around. What were the initiatives that brought additional revenues into the state. His cornerstone program was his roads program and that has yet to be started.”

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