Although Gov. Jim Justice proposed an income tax phase-out and other significant changes to West Virginia’s tax code, those measures are not reflected yet in the budget his administration has introduced.
“I have delivered to our speaker and our president that flat budget that I have referred to,” Justice said during his State of the State address on Wednesday evening.
Flat spending is a key component of Justice’s financial plans for the next several years. To take effect, his proposals would need to be passed by the Legislature and then would need additional time to actually go into effect.
The budget proposal does, however, reflect the effects of covid-19 on the state’s business climate.
After all the economic effects of the coronavirus pandemic, Justice’s administration is proposing a stable, $4.569 billion budget.
“We feel like we’re as stable today as we were last March when the legislative session ended,” Revenue Secretary Dave Hardy told reporters in an overview session of the coming year’s budget proposal.
Hardy said the overriding goal in developing the budget for the coming fiscal year was to ensure stability and continuity of state government. That’s a basic goal, but needs to be stated because of the way the coronavirus pandemic hit the economy.
“The takeaway from this budget is, it’s a flat budget. It’s a budget based on last year. When we’ve been able to pull that off at a time when our revenue sources have been completely altered and changed by the pandemic and other economic sources,” Hardy said.
West Virginia’s economy, because of a stay-home order and diminished consumer confidence, experienced a sharp downturn last April and May. Since then, state officials said, economic activity has recovered steadily.
Hardy said state revenue estimates for the coming fiscal year are right in line with what they were last year.
He said some areas of state revenue such as severance and consumer sales could improve as the recovery continues. Others, such as personal income and corporate income, will be affected by federal law changes.
“We still have a lot of uncertainty for the short-term from the pandemic and the economy,” said Deputy Revenue Secretary Mark Muchow, describing variations on how quickly vaccines roll out or how soon people feel more comfortable spending their money while going out.
But there’s enough confidence, Muchow said, that “we have not revised our revenue estimates.”
Healthcare costs also continue to be affected. Referring to the federal Medicaid program, Hardy said, “We’ve had an increase in enrollment and also possibly expenses, but we’ve also had a much larger federal match.”
Michael Cook, the state budget director, described some additional expenditure priorities such as more funding for the flood wall in Milton and more funding for veterans programs.
But, he said, “Proposed expenditures are relatively flat.”
Asked about the possibility of pay raises for state workers for next year, Hardy said “there’s no statewide pay raise for all the employees.”
Reporters in the budget preview session asked about discussion of a phase-out of the state’s personal income tax. Such a move was not reflected in the budget proposal for the coming fiscal year.
The governor made it very clear to us from Day 1 that we wanted to keep our budget consistent and flat and our revenue sources consistent with what we had in the previous fiscal year,” Hardy said.
If an income tax phase-out were to pass, Muchow said, then “That’s a new deck of cards and we substitute that deck of cards for the deck we have today.”
A budget overview session for both the House and Senate finance committees is scheduled for 8 a.m. Thursday in the House Chamber. The public may watch the session via livestream.