Budget Beat – September 26, 2014

More on Last Week’s Poverty Numbers: Rich Getting Richer

Last week ‘s data on poverty in West Virginia showed that the number of children and families living in poverty is still too high. What we also learned is that the state’s economy is starting to grow again, post-recession, but it’s the wealthiest in the state who are seeing the biggest boost. The gap between low-income workers and high wage earners continues to grow and the recovery is not boosting the state’s middle class. For more, here is Sean’s blog post.

Income inequality affects different states in different ways, and is caused by different policies. With the incomes of lower- and middle-class families remaining stagnant, however, no matter where you live those families will have less to spend. More in this Washington Post article on the far-reaching impacts of income inequality.

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State of Working West Virginia: State’s Energy Economy is Moving North

West Virginia is still a coal state but production has been declining in the south and held steady in the north. That trend, coupled with the boom in natural gas production, means West Virginia’s energy economy landscape is changing.

Our annual State of Working West Virginia report, due out next week, will paint the complete picture on the state of West Virginia’s current employment situation and recommendations for how to give coal miners and the state’s economy a smoother transition as coal plays a smaller and smaller role.

A sign of the changing role of coal and other fossil fuels hit Wall Street this week when the Rockefeller Brothers Foundation announced it would divest its interests in carbon-emitting energy sources. Read local reaction in this week’s Charleston Gazette.

 

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Constitutional Amendment Clarifies Property Tax Law, But Just for Boy Scouts

On November 4th, a constitutional amendment will be on the ballot to allow the Boy Scouts of America to rent out its Summit Bechtel Reserve to for-profit businesses without losing its non-profit property tax-exempt status.

The Summit Bechtel Reserve is a 10,600 acre outdoor activity center that hosts the National Scout Jamboree. In addition to hosting the Jamboree, the Boy Scouts wish to use the reserve to host other events, and use the profits from those events to maintain the property and offset expenses. However, the Boy Scouts are concerned that by leasing the facility to a for-profit business, they could lose their property-tax exempt status, leading them to seek the constitutional amendment.

Current West Virginia law is ambiguous as to whether or not the Boy Scouts would lose their property tax exemption if they leased their facility to a for-profit business. The West Virginia Constitution provides a property tax exemption for, “property used for educational, literary, scientific, religious or charitable purposes.” The Constitution does not address the leasing of property by exempt entities.

The leasing of property is addressed in state code. West Virginia code states that property used for charitable, or economic development purposes by a nonprofit is exempt, unless the property is held or leased out for profit [§11-3-9(12), §11-3-9(14)]. However, the code also states that any property owned or held in trust by a nonprofit or charitable organization is not exempt, unless the, “property, or the dividends, interest, rents or royalties derived there from, is used primarily and immediately for the purposes of the corporations or organizations [§11-3-9(29)(d)].”

According to Dr. Calvin Kent at Marshall University, the language granting the property tax exemption to nonprofits that use rents received from the property for their organizational purpose was adopted in 1945, in response to a 1944 West Virginia Supreme Court decision in which a nonprofit organization that used the profits of a commercial hotel it owned for charitable purposes lost its property tax exemption.

Since the 1945 amendment, the West Virginia Supreme Court has allowed an exemption for buildings owned by a nonprofit but leased to another nonprofit, but has not considered a case where a nonprofit leases to a for-profit organization, nor has it ruled on the constitutionality of the 1945 amendment.

It is unclear whether or not the Boy Scouts would lose their property tax exemption by renting their facility to for-profit businesses under current state law. How such scenarios are treated apparently varies county by county. In a recent survey conducted by the Center for Business and Economic Research at Marshall University, county assessors where given hypothetical scenario of nonprofit foundation which owns a campsite that is rented to for-profit businesses and that rental income is used for the expenses and debt of the campsite. 11 of the 19 responding assessors said that the campsite would be exempt from property taxes, while 8 said it would lose its exemption.

In another scenario, assessors were asked about a building owned by a nonprofit, but partially leased to a for-profit, with the rental income used for the work of the nonprofit. 7 of the 16 responding assessors said that the entire building would be exempt from property taxes, while 9 said it would not be fully exempt. Of the 9 that said it would not be exempted, 8 said that the portion of the building used by the nonprofit would be exempted, while 1 said the entire building would be taxable.

With the ambiguity in state law, and disagreement among county assessor over the issue, the Boy Scouts are right to be concerned with the property tax exemption, and West Virginia’s laws do need clarifying. But the constitutional amendment on the ballot in November only clears up the issue for the Boy Scouts.

The proposed amendment clarifies that a nonprofit organization would not lose its property tax exemption on its property whether or not that property is used for the purposes of the nonprofit. However, the amendment only applies to a nonprofit, “that has as its primary purpose the development of youth through adventure, educational or recreational activities for young people and others, which property contains facilities built at a cost of not less than $100,000,000 and which property is capable of supporting additional activities within the region and the State of West Virginia.” In other words, the amendment would only apply to the Boy Scouts’ Summit Bechtel Reserve.

So while the Boy Scouts would be in the clear if the amendment passes, the ambiguity in the law would remain for everyone else. Hospitals, churches, and other nonprofits that engage in this activity would be left in limbo.

For example, the CAMC Nautilus facility is run by a for-profit corporation, but is located on CAMC property. And while CAMC Nautilus pays personal property taxes on its equipment, neither it nor CAMC, a tax exempt non-profit hospital, pays real property taxes. The passage of the constitutional amendment may imply that either CAMC or CAMC Nautilus should be paying real property taxes. The same is probably true for any other tax exempt hospitals that lease space to privately run gift shops, coffee stands, and cafeterias.

Of note is the fact that while the Boy Scouts claim to want to use the revenue for maintenance and upkeep of the park, which arguably is already legal under state law, the proposed amendment allows for the use of the property whether or not it is for the purposes of the organization. This could be the key factor. If the Boy Scouts are planning to use the proceeds from renting the facility for reasons outside the purposes of the Boy Scouts organization, then they would need the amendment to keep their tax exemption, since the code clearly states the property and rents must be “used primarily and immediately for the purposes of the corporations or organizations.”

While it is clear that West Virginia’s law need clarifying, the proposed amendment doesn’t actually fix the law. By carving out a special exemption for one organization, the state would be leaving all other organizations in limbo, and would set a bad precedent for the future. And if, as the language of the amendment implies, the Boy Scouts want to engage in activities that do not further the purposes of its organization, then they probably don’t need special tax treatment to do so.

Census Data Show Rich Getting Richer in West Virginia

Last week’s release of the American Community Survey (ACS) data contained more than just poverty statistics. It also contained some interesting information about income trends in West Virginia. As we noted last week, one of the reasons poverty has been slow to fall, despite economic growth, is income inequality, with little of the past three decades of economic growth reaching the poor and middle class (for more on that topic read this).

While we’ve covered growing income inequality before, the ACS data provides a fresh view on the extent of income inequality in West Virginia and its growth. According to the Census data, the richest 1/5th of households in West Virginia, the top 20%, take in nearly half of the income in the state. And their share has been growing in recent years.

income inequality

The trend is even more pronounced when looking at the top 5% of households in West Virginia. In 2013, the top 5% of households in West Virginia took in 21.1% of the state’s income, up from 19.8% in 2006.

The top 20% of households took home an average of $138,603 in 2013, compared to just $9,205 for the bottom 20%, and $41,253 for the household in the middle. Those in West Virginia’s top 5% had an average household income of $235,421 in 2013.

These numbers from the Census serve as yet another reminder that with growing income inequality, economic growth alone is not enough to help the middle class or lift families out of poverty. Without public policies like raising the minimum wage and expanding the EITC, more and more struggling West Virginians will see their slice of the economic pie shrink.

Gambling With Children’s Health

The health of of close to 25,000 children in West Virginia is at risk if Congress does not chose to reauthorize the Children’s Health Insurance Program (CHIP). As  Senator Jay Rockefeller mentioned in today’s Charleston Gazette, defunding CHIP could hurt not only children’s health but making it harder for families to make ends meet. CHIP is a highly successful program in West Virginia, granting quality health coverage to thousands of children from working families. 

The added benefits offered in the CHIP program might otherwise be unaffordable for many working families in state. For example, CHIP’s medical benefits include dental care, hearing aids, and additional physical/occupational therapy where marketplace coverage designed for adults does not provide these options for children.

Additionally, CHIP coverage is much more affordable for working families due to the caps on deductibles and out-of-pocket costs. A report  from the National Alliance to Advance Adolescent Health details the potential cost increases if the children in the CHIP program are moved to private marketplace plans, qualified health plans (QHPs).

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Source: Margaret A. McManus and Harriette B. Fox, “Lack of Comparability Between CHIP and ACA Qualified Health Plans” (Washington, D.C.: The National Alliance To Advance Adolescent Health, July 2014). 

These charts show that the out-of-pocket limits could cost families almost tenfold in a marketplace plan. Also, children in the CHIP program have to pay little to cover their deductibles, where, in marketplace plans, families could end up paying close to $2,500 before their insurance company will begin paying.

We shouldn’t be playing a political game with the health of  children in our state. Children have special health care needs. Ignoring the difference in needs of children and adults will put the healthy development of children at risk.

The marketplaces are not yet ready to provide the type of comprehensive coverage these children need and the costs put children at risk of becoming uninsured altogether.  West Virginians should encourage lawmakers to make sure CHIP funding is renewed and not “wait and see what happens” when the program is gone.

West Virginia Has Recovered From The Recession, It’s Poor Have Not

By most measures, West Virginia’s economy has finally recovered from the recession. Real GDP has grown by more than nine percent since bottoming out in 2009, the unemployment rate has been steadily declining, and the state finally has as many workers as it did before the recession.

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But while the economy as a whole has been improving, the gains haven’t been shared by all West Virginians, particularly the state’s poorest citizens. According to data released this week from the U.S. Census Bureau, West Virginia’s poverty rate has continued to remain above its pre-recession levels.

West Virginia’s poverty rate grew during the recession, from 16.9% in 2007 to 18.1% in 2010. Since then the rate has fluctuated some, but none of the changes has been statistically significant, meaning that after rising during the recession, the state’s poverty rate has been essentially unchanged.

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The same is true for the state’s child poverty rate.  The state’s child poverty rate jumped up from 22.1% in 2007 to 25% in 2010, and has yet to come back down. Once again, fluctuations in the state’s child poverty rate have not been statistically significant.

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Poverty among children under the age of five has not followed  the same pattern as overall child poverty. The young child poverty rate was essentially flat throughout the recession, with none of the fluctuations in the rate being statistically significant. Then, in 2013, the poverty rate for children under five jumped from 28.3% to 33.2%. However, it should be noted that the children under five poverty rate has a large margin of error, particularly with one year of data. To really get a firm grip on what is happening with child poverty, we may need to wait for the three- or five-year data.

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Senior poverty also diverged from the overall poverty trend. While overall poverty increased, senior poverty actually fell between 2008 and 2011, from 11.0% to 9.4%. It has since remained essentially flat, with the year-to-year fluctuations not statistically significant.

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Finally, in addition to the poverty data, the ACS release also has some data on incomes in West Virginia. One important income data point that can be used to measure the state’s economic health is median household income. Median household income measures the income of the typical household – or the household in the middle of the income distribution – and serves as a good indicator for how the middle class is faring. 

Adjusting for inflation, West Virginia’s median household income fell during the recession, from $41,638 in 2007 to $39,844 in 2011. It had recovered to $41,253 in 2013, but is still below its pre-recession level. Real median household income has also underperformed compared to Real GDP growth, suggesting that not only is the state’s recent economic growth not reaching the poor, its not doing a good job of reaching the middle class either.

median income

The ACS data not only showed that the state’s economic growth isn’t reaching the poor and middle class, they also showed the growth is benefiting the wealthy. The ACS also measures the state’s Gini Index, a measure of the distribution of income in a region. The higher the score on the Gini index, the greater the income inequality. A score of 1 means that all the income in a region is held by a single person, and a score of zero means that all income is held equally among the population.

West Virginia’s Gini Index has grown since the recession, from 0.454 in 2007 to 0.465 in 2013, showing that most of West Virginia’s income growth has gone the those at the top of the income distribution.

So not only did this week’s poverty data show that thousands of West Virginians are still struggling to get by, even as the state’s economy grows, but they are seeing a smaller share of the benefits of their hard work.

Budget Beat – September 19, 2014

Poverty Numbers Out This Week Show Stubbornly High Poverty Rate for West Virginia

While its economy has recovered from the Great Recession, West Virginia’s people still face an uphill climb in terms of getting out of poverty. Nearly one in five in the state lives in poverty, including one in three young (under the age of five) children.

The U.S. Census data released this week updated the poverty picture that low- and middle-income working families face. While the state’s economy continues to improve and its unemployment rate is down, it’s the high wage earners that have seen increases in their paychecks. This on-going income inequality is addressed in Sean’s blog post today.

Read more in the Charleston Gazette, Charleston Daily Mail, the State Journal and West Virginia Public Broadcasting.

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Number With Health Care Continues to Grow

More U.S. Census data also out this week showed that the number of people lacking health insurance in West Virginia continues to decline.

The numbers hint at promising trends for bringing down the number of uninsured. Both Obamacare and the state’s expansion of Medicaid are expected to cause an even greater improvement when next year’s numbers come out.

Read more in the Charleston Gazette and the State Journal.

Speaking of health care, the Children Health Insurance Program (CHIP) is before Congress for reauthorization. With 25,000 West Virginia children relying on this highly effective program, read more in Erin’s blog post on why we should not play political games our children’s health.

Save the Date!

What Is A Safe Water System? Let’s Make It Happen!
A panel discussion & community conversation on our water

Thursday, November 6th
7-9pm (doors open at 6:45)
University of Charleston, Erma Byrd Gallery (in Riggelman Hall)
Event is free. Register here

Speakers include: Dr. Rahul Gupta (Kanawha-Charleston Health Department),
Fred Stottlemyer (former director of Putnam PSD), and other safe water experts.

Despite legislation and promises from our politicians, our drinking water system is still at risk. The Public Service Commission’s investigation of WV American Water has been pushed back until next year, and the legislation we have won is at risk.

Come join your neighbors the evening of November 6th to hear experts explain what a safe water system might look like, and discuss among our community how we can achieve that goal.

Sponsored by: Advocates for a Safe Water System, WV Council of Churches, WV Center on Budget and Policy, National Association of Social Workers, and the WV Healthy Kids & Families Coalition.

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Friday Fun

Go here to check out video documentaries on West Virginia’s history and culture, narrated by the people who live here. The website is continuing to grow until it includes all 55 counties.

 

Budget Beat – September 12, 2014

Our Children Our Future Policy Symposium Brings Together Hundreds from Across the State

The WVCBP was proud to be a partner in the Our Children Our Future Policy Symposium this past week in Charleston. Hundreds of leaders and activists from social advocacy organizations, faith-based groups, government agencies, schools and universities, and families and young people gathered to discuss a wide variety of policy proposals all aimed to tackle poverty in West Virginia.

In just two years, the Our Children Our Future campaign has had 14 victories including an increase in the minimum wage, restoration of budget funding to help working families, and the creation of the WV Future Fund.

As the 2015 Legislative Session approaches, the WVCBP will work closely on two new initiatives in particular – the creation of Voluntary Employment Retirement Accounts (VERA) and a paid sick days policy for West Virginia workers.

Next up for the OCOF campaign is a series of Fall Forums across the state. To learn more, email Stephen Smith with the WV Healthy Kids and Families Coalition.

If you weren’t able to attend, check out this video of Day 2 of the Symposium as youth and parents testified before the Joint Committee on Children and Families.

Ted at 2014 Symposium
WVCBP Executive Director Ted Boettner delivers opening remarksat this week’s Our Children Our Future Policy Symposium at the Culture Center on 9.9.14.

Read more in the Charleston Daily Mail and the State Journal. Additionally, here is coverage from West Virginia Public Broadcasting.

Coal in Ground Could Become a Stranded Asset

To tackle climate change and reduce our carbon emissions, some fossil fuels will be left where they are, becoming a “stranded asset.” In an interesting article forwarded to us by Betty Rivard, this New York Times article explains the concept and its far-reaching implications.

Preview on New Poverty Data

Check out this space next week as we look at newly released census numbers on poverty and inequality and how West Virginia is faring.

Here’s a preview from the Center on Budget and Policy Priorities:

  • As in Other Recent Recoveries, Poverty Has Been Slow to Improve
  • Austerity Policies Likely Hampered Progress Against Poverty in 2013
  • Unequal Wage Growth Also Slowed Progress
  • Income Inequality at Record-High Level in 2012
  • Most Poverty Figures Released on Tuesday Won’t Reflect Non-Cash Benefits
  • Census Will Show Anti-Poverty Impact of Some Cash and Non-Cash Benefits

Budget Beat – September 5, 2014

Increase in Minimum Wage Helps Working Families

Fast-food workers calling for a higher wage brought the minimum wage debate back into the headlines this week. During the 2014 Legislative Session, West Virginia lawmakers approved a $1.50 an hour raise phased in over two years but there is a national movement to increase it to $10.10 an hour. WVCBP Fiscal Policy Analyst Sean O’Leary was on Hoppy Kercheval’s radio show yesterday to discuss the merits of a minimum wage hike and just who would be affected. And in his blog post today he further refutes some of the misconceptions of the impacts of a minimum wage hike.

Bringing the Tobacco Tax Up-to-Date Would Decrease Smoking Rates

The decision by drug store giant CVS to remove tobacco products from its shelves was welcomed this week by health professionals in West Virginia. To truly tackle the state’s high smoking rate, however, it’s time to increase its tobacco tax which, at just 55-cents a pack, is the 43rd lowest in the nation. WVCBP Health Policy Analyst Erin Snyder was quoted in this Charleston Gazette article on the announcement from CVS and the issues it raises.

West Virginia Women Making Less Now than in 2010

A report by the Institute for Women’s Policy Research out this week ranks West Virginia last in the nation for women in employment and earnings. West Virginia and Alabama were the only states receiving an F grade in the report and, in West Virginia women have actually lost ground over the past four years. Read more in today’s Charleston Gazette.

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Raising the Minimum Wage Deserves Attention

Yesterday, I had the privilege to discuss efforts to raise the minimum wage with Hoppy Kercheval on his Talkline show. Today, Hoppy followed up with this commentary, arguing that raising the minimum wage is bad economics because it wouldn’t actually help the working poor. But, the facts that Hoppy cites in his commentary don’t really support that argument.

Hoppy points to research from economist David Neumark, who says that 29% of the benefits of raising the minimum wage to $10.10 would go to families with incomes at least three times the poverty level (if David Neumark sounds familiar, he’s the economist whose work on the employment effects of the minimum wage isn’t terribly objective).

Neumark’s work largely agrees with the findings of the Congressional Budget Office, who said that raising the minimum wage would increase income by $5 billion for families below poverty, $12 billion for families between one and three times the poverty level, and $2 billion for families between three and six times the poverty level. So some of the benefits would go to families who aren’t desperately poor. But rephrase Neumark’s and the CBO’s findings, and they don’t sound all that bad: over 70% of the benefits would go to families below three times the poverty threshold. Not to mention that the CBO also found that raising the minimum wage to $10.10/hour would lift 900,000 people out of poverty, reducing poverty by 2 percent. 

It’s also worth mentioning that three times the poverty level still isn’t exactly living the high life. In 2012, three times the poverty threshold for a family of four was $70,476. That’s lower than the median four-person family income of $76,049. So, one could say that in addition to 70% of the benefits of raising the minimum wage flowing to poor families, most of the remainder is helping out the middle class, which I’m sure we all agree could use it. Doesn’t sound like “bad economics” to me.

We already know the demographics of who benefits from the increase in West Virginia’s minimum wage, and by-and-large it’s low-income workers supporting their families. An increase to $10.10 doesn’t change much. The average family income of a worker who earns less than $10.10/hour in West Virginia is less than $35,000. When you talk about raising the minimum wage, you’re talking about helping low-income families.

Finally, Hoppy is right that the Earned Income Tax Credit (EITC) is a very effective tool for fighting poverty and helping low-income families. But for a commentary all about how the EITC is preferable to minimum wage because it targets low-income families better, he’s been strangely silent on recent changes to the Child Tax Credit (CTC), which is closely related to the EITC. A bill passed by the U.S. House of Representatives and supported by Rep’s Capito and McKinley increased the maximum earnings level of the credit, while letting the reduced earnings minimum expire. In effect, the House voted to reduce the CTC for low-wage workers and increase it for high-wage workers.

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While a single parent earning the minimum wage, working full time would no longer be eligible for the credit, couples making between $150,000 and $205,000 with two children would become newly eligible. The disproportionate changes to the CTC are far more egregious than the fraction of low-wage workers working in high-income families who benefit from a minimum wage increase. But it didn’t create much outcry from the likes of David Neumark and Hoppy Kercheval. Maybe because tax forms are dull and complicated and the minimum wage debate has a sexier ring to it.