Budget Beat – April 24, 2015

Tax Reform Continues to Make Headlines

On May 4, the Joint Select Committee on Tax Reform will hold its second meeting to look at how to “update” the state’s tax system. So far committee members have floated around some hefty suggestions, like eliminating the Personal Income Tax and further reducing business taxes. Suggestions for how to replace that lost revenue and pay for these cuts have been less in the news.

Ted’s opeds in the Charleston Daily Mail and the Sunday Gazette-Mail both explain why the legislature should move with caution before slashing anything else from the state budget, the state Personal Income Tax in particular. As he states, here are some other avenues that tax reform could take:

  • Raising tobacco and alcohol taxes to improve the health of West Virginians and reduce state medical expenses.
  • Updating the Personal Income Tax by reducing taxes on the middle class and increasing them on higher income people, who have gained the most economically since the end of the recession while middle-class wages have stagnated or declined for most workers.
  • Modernizing the sales tax to reflect the changes in our economy from consuming goods to purchasing services.
  • Closing offshore corporate income tax loopholes.
  • Closely scrutinizing and scaling back business tax subsidies.

Tax Incentives? What Tax Incentives?

Here’s something to chew on from a North Carolina study: according to Economic Development Quarterly, “contrary to the belief among many economic development practitioners that tax credits are a motivating factor for firms to engage in economic development, only 30% of executives in incented companies were aware that their company had received a state economic development tax credit.”

Time for a West Virginia EITC

Tax time is hard for all of us, especially low-income working families. The federal Earned Income Tax Credit (EITC) provides tax relief to those families, helps them keep money in their pockets, and, in turn, boosts the local economy. Twenty-five states and the District of Columbia also have their own EITC which gives those same families relief from state taxes as well.

West Virginia has over 180,000 people living in poverty. That’s more than the populations of Charleston, Huntington, Parkersburg, Wheeling and Beckley combined.

It is time for a state EITC in West Virginia to help those families.

This would help reduce the current inequity in the state’s tax system where those who earn less than $16,000/year pay an average of 8.7% of their income in state and local taxes, while those earning above $306,000 pay only 6.5%.

For more on why West Virginia needs a state EITC, check out Sean’s blog post.

running-backpack-children.jpg

Budget Cuts Hitting Home

Tax cuts are already causing harmful budget cuts, another example of which hit the news today with an announced tuition hike at West Virginia State University. College students are paying the price for years of budget cuts as tuition increases create a greater burden on their families’ budgets.
graduates-sm.jpg

Happy Earth Week!

Budget Beat – April 17, 2015

Legislature Gives Glimpse Into its Ideas for Tax Reform

Tax Reform Committee Holds First Meeting

It’s been a taxing week, so to speak, between April 15 and the first meeting of the Joint Senate Select Committee on Tax Reform on Monday.

The meeting was the public’s first chance to get a glimpse into the new Republican leadership’s ideas of how to reform the state’s tax code. There was a lot of discussion about further tax cuts, or even the elimination of the Personal Income Tax.

The Personal Income Tax makes up a large percentage of the state’s $4 billion+ budget, about 40% of revenue in 2016. Eliminating it would leave a huge hole in the state’s ability to pay for important expenses like highway maintenance and funding for higher education.

One suggestion from the legislature on how to fill that hole is to increase the state’s sales tax, including establishing a tax on personal services from accountants and lawyers to hair stylists.

While this would create much-needed revenue, it would further shift the state’s tax burden onto those least likely to afford it. Poor people pay a larger share of their income toward sales tax than the wealthy, thus further shifting the overall tax base onto low-income families.

For a great look at the history of tax reform in West Virginia, and its dismal impact on creating jobs, check out Sean’s blog post.

For more on Monday’s Tax Reform Committee meeting, read this week’s Charleston Gazette and State Journal, or listen in to West Virginia Public Broadcasting.

For more, here’s Sean’s presentation from this week’s National Association of Social Workers, WV Spring Conference.

 2015 NASW OLeary presentation

Suggestions Made and Caution Urged

There was widespread reaction to the reforms suggested by the Tax Reform Committee. Governor Tomblin asked legislators to be “fiscally responsible” and the WVCBP suggested proceeding with caution, while using this opportunity to make the tax system more fair to working families.

Time to Modernize West Virginia’s Excess Acreage Tax

An idea considered by Governor Underwood’s Commission on Fair Taxation would have increased and overhauled the Excess Acreage Tax. This could incentivize economic development in West Virginia, particularly in the southern part of the state. More details in Ted’s blog post.

Dear White People at WV International Film Festival

The West Virginia Film Festival kicks off tonight at the LaBelle Theater in South Charleston with lots of great films. Come out and watch Dear White People on Tuesday, April 21 at 6PM to be followed by discussion on racial equity with participants of the Race Matters in WV project.

Dear White People

Become a Mentor to Someone in Need

Help KISRA (the Kanawha Institute for Social Research and Action) provide a second chance for someone in need by joining its mentor program. KISRA’s second chance mentoring program is designed to help non-violent offenders reclaim their place in the community, stabilize their lives and achieve self-sufficiency. Apply here.

Will Tax Reform Work This Time?

Yesterday, the Joint Select Committee on Tax Reform met for the first time to start laying out the plan for comprehensive tax reform in West Virginia. Citing ALEC’s dubious Rich States/Poor States report, Senate President Bill Cole and House Speaker Tim Armstead said that West Virginia’s tax structure is broken and burdensome, and is holding back economic growth, and tax reform is just what the doctor ordered.

Now if all that sounds familiar, it should, because it all was said about less than ten years ago during West Virginia’s last tax reform effort. Under then-Governor Joe Manchin, West Virginia underwent tax reform. And then, as it is now, the complaint was that West Virginia’s tax system was too anti-growth, and put us at a competitive disadvantage. In particular, the Chamber of Commerce complained in 2006 that the tax responsibilities of business were too high, blaming our Corporate Net Income Tax rate and the Business Franchise Tax as the source of the state’s uncompetitiveness.

Over the next two years, the Chamber got exactly what it asked for as the Corporate Net Income Tax rate was reduced from 9.0% to 6.5% while the Business Franchise Tax was phased out and eliminated entirely.

rates

At the time, the tax cuts were widely praised by conservative anti-tax groups, who predicted great things for West Virginia. The Cato Institute called West Virginia’s tax reform the “most pro-growth tax reform” in the country, giving Governor Manchin an “A” grade for fiscal policy, while the Tax Foundation said that the state’s tax cuts would put West Virginia, “in a better position to compete regionally with Pennsylvania and Virginia and place itself in a better position nationally.

Not everybody was enamored, as Ted warned in 2008 that the tax cuts could prove costly, while doing little to grow the economy. The Center’s warnings went unheeded, as Chamber of Commerce President Steve Roberts quipped that Ted’s warning was his “opinion” and it, “doesn’t mean the opinion has any resemblance to reality.”

And as it turns out, Ted ended up being a whole lot closer to reality. The business tax cuts blew a huge hole in the budget, to the tune of $236 million this year alone. Business tax revenue will be lower in 2016 than it was in 1990, and the state has faced year after year of budget problems, problems that would have been worse if it weren’t for the fortunate timing of the Marcellus Shale boom.

revenue

 The 2006/2008 tax reform worked in one sense, in that it dramatically reduced the state’s business tax burden while improving our state’s “business tax climate.” But it failed to actually improve the state where it matters most: jobs. The chart below tells the story. While West Virginia’s business tax rate fell from 7.6% of gross state product in 2007 to 5.8% in 2014, and while the state’s business tax climate rank improved from 37th to 21st, annual employment fell by 39,000.

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Instead of competing better nationally, West Virginia has fallen further behind. While the rest of the country is setting records for job growth, there are not only 39,000 fewer West Virginians working than before the tax cuts began but also 11,000 fewer manufacturing jobs. To see the real impact of the tax cuts, just take a look at tuition at colleges and universities in West Virginia, which are on the rise as budget cuts to higher education, brought on by tax cuts, have taken hold.

Unfortunately, West Virginia’s policymakers seem intent on doubling down on this failed policy that hasn’t created jobs or made the economy stronger. The strategy couldn’t be clearer than when Senate President Cole talked about improving West Virginia’s ranking in ALEC’s “Rich States, Poor States” report. The blueprint for reform from the ALEC report, which has consistently failed to predict any sort of economic growth, is simple: take from the poor and middle class and give to the rich. It’s a recipe for economic inequality and declining middle-class incomes, all while depriving the state of the ability to invest in the future. Those policies have failed West Virginia already, and are failing elsewhere. We don’t need to give them a second chance. What we need to do, is move from austerity to prosperity by strengthening the middle class. 

Time to Modernize West Virginia’s Excess Acreage Tax

With tax reform looming on the state’s public policy agenda, now would be a opportune time to revisit the state’s Excess Acreage Tax. Since 1905, a corporation purchasing 10,000 acres or more of property in the state is subject to a one-time five cents per acre tax on owning the property. In 1999, Governor Underwood’s Commission on Fair Taxation (3-694) recommended increasing this tax to 50 cents per acre, making it an annual tax, lowering the threshold to 1,000 acres and allowing a credit against the state’s severance tax. This is a step in the right direction and it is low overdue.

As many West Virginians know, one of the state’s historic economic problems has been the control of large absentee land and mineral owners.  As we discussed in our 2013 report Who Owns West Virginia in the 21st Century?, this problem has not gone away. In 2012, the top 25 land owners in the state owned about 18 percent of the state’s private land and none of the top 10 largest land owners were headquartered in West Virginia. In Wyoming County, two out-of-state companies – Heartwood Forestland Fund and Norfolk Southern – owned over half of the county’s private land.

Adequate taxation of large landowners could not only spur development of more land in the state (especially in southern WV) but could also provide needed revenue to fund economic development and lower the tax responsibilities of landowners with improvements. According to data from the West Virginia Property Tax Department,  approximately 352 corporate entities (excluding non-profits) owned at least 1,000 acres of land in the state for a total of 3,380,000 acres. At 50 cents an acre, this would amount to an estimated $1.7 million in annual tax revenue – not including the tax credit against the state’s severance tax which would lower this amount. The state’s largest private land-owner – Heartwood Forestland Fund, which owns about 500,000 acres in the state – would have an annual tax bill of about $250,000.

While the proposal of increasing the tax from 5 to 50 cents is a step in the right direction, it might not be high enough to incentivize the development of more land or provide adequate revenue to fund economic development and other priorities. Adjusted for inflation, the five cents per acre tax that was established in 1905 would be the equivalent of about $1.25 today.

One idea would be to create a graduated Excess Acreage Tax rate that increased with the amount of property owned over 1,000 acres. This would help provide a much greater incentive to the largest land owners to develop or sell their land and it would help ensure that those at the bottom end don’t buy more land.

EXCESS ACREAGE TAX

If we started with a tax rate of 50 cents per acre between 1,000 and 2,499 acres and ended with a top rate of $5 per acre over 250,000, it could yield an estimated $10.6 million in revenue (not including the severance tax credit). If the lowest rate was set at a $1 per acre and increased by a $1 per acre until it hit $10 for landowners over 250,000 acres, it could yield $21.2 million annually. It would also be wise policy to exclude any producing farms, which is something we do not want to discourage with the Excess Acreage Tax.

Along with reforming the Excess Acreage Tax, lawmakers could also consider revamping the state’s preferential tax treatment of unimproved land. As the Lincoln Institute of Land Policy has pointed out, using the use-value assessment (UVA) approach instead of the market-based approach that is used on other types of property can dramatically lower property value and taxes.  For example, in Wyoming County, Heartwood Forestland Fund owns a parcel containing 12,463 acres that has an appraised value of $2,358,450 (assessed value is $1.4 million) and their total property tax bill  in 2014 was $31,490. This means Heartwood is paying about $2.53 per acre, with an appraised value of just $189 per acre. Using a market-value approach would mean that this land would be valued closer to $500 an acre.

Governor Underwood’s Commission on Fair Taxation was correct in recommending much-needed changes to the state’s Excess Acreage Tax.  As the legislature moves ahead with reforming our state’s tax code this year, they should consider reforming the state’s Excess Acreage Tax. This could not only incentivize economic development in West Virginia, but also provide a much-needed source of revenue as coal continues to decline in southern West Virginia. 

UPDATED

Budget Beat – April 10, 2015

Tax Reform for the People

April 15 is right around the corner and whether you are expecting a refund or writing that check, it’s a good time to reflect on the mind-bending systems called our tax code.

The federal income tax is progressive, meaning that it doesn’t unfairly and disproportionately tax low-income people. West Virginia’s tax system is upside-down, resulting in low- and middle-income families paying a larger share of their income in taxes than those with the best ability to pay. 

Who Pays 4.10.15

West Virginia policymakers have tackled tax reform several times, most recently by then-Governor Joe Manchin. And the Republican legislature’s newly formed Joint Select Committee on Tax Reform will hold its first meeting this Monday, April 13 at 2:00 PM in the House Chamber. We will recap that meeting in next week’s Budget Beat.

Much of the discussion surrounding tax reform usually revolves around making the state’s business climate more friendly by reducing or completely eliminating business taxes. In fact, over the past 10 years, West Virginia has moved from 34th to 21st in its business tax ranking after cutting the corporate income tax and phasing out the business franchise tax. While these tax cuts have cost the budget millions each year, they have failed to bring jobs to the state. In fact, West Virginia has lost nearly 28,000 jobs during that same time period.

Business Tax Cuts No Jobs 4.10.15

For lots of ideas on how tax reform can be structured to benefit West Virginia’s working families, instead of corporations, check out our recommendations in this year’s report on the state budget.

Rich States, Poor States Debunked

Another annual ranking is Rich States, Poor States complied by the American Legislative Exchange Council (ALEC). This year West Virginia fell six spots on this index which looks at tax rates and regulation. Here’s an interview on yesterday’s West Virginia Metro News with one of the report’s authors.

For a complete debunking of the ALEC index, check out this report by Good Jobs First which shows that, in reality, the less a state conformed with ALEC policies the better off it was. 

Snake Oil cover

Tax Freedom Day

Every year the Tax Foundation releases a report on Tax Freedom Day which it describes as the day when “the nation as a whole has earned enough money to pay its total tax bill for the year.” The Center on Budget and Policy Priorities recently published a report debunking the concept, however, stating “few Americans would likely feel more ‘free’ if Tax Freedom Day came earlier in the year because the federal government stopped providing for national security, ensuring homeland security, conducting food safety inspections, or testing prescription drugs.”

Senator Manchin Votes to Expand Social Security

Senator Joe Manchin joined five other Democrats to co-sponsor an amendment to the Senate budget bill that would have expanded Social Security benefits. The amendment was ultimately defeated with a 42-56 vote. According to the AARP, one in four West Virginians receives Social Security which provides $9.5 billion in economic output for the state at a rate of $1.61 for every $1 received.

West Virginia Unrecovered: No Job Gains Since 2008

It has been over seven years since the beginning of the Great Recession. While the country is finally beginning to recover from the biggest recession since the Great Depression, West Virginia’s rocky recovery has yet to fully materialize. In fact, over the last couple of years the state’s job growth has been non-existent. At the same time, the state is also seeing its population decline faster than any other state.

According to the U.S. Bureau of Labor Statistics, the number of jobs in West Virginia was lower in 2014 than it was 2008 in each of its four major employment surveys. This includes the household survey (Local Area Unemployment Statistics – LAUS), establishment survey (Current Employment Statistics- CES), occupation survey (Occupational Employment Survey- OES), and the survey of covered employees (Quarterly Census of Employment and Wages – QCEW). While of these surveys have a different definition of “employed”, none of them shows positive job growth over this period.

4 surveys down in wv

The household survey (LAUS) shows that the total number of West Virginia residents employed has dropped by over 39,000 since 2008, while the survey of business establishments (CES) has shown a decline of 1,900 jobs. The annual survey of  occupational employment (OES), which is conducted in May of each year, shows a decline of 10,000 jobs in the Mountain State since 2008, while the quarterly survey of those covered by unemployment insurance (QCEW) shows an employment decline of nearly 13,500.

Three other surveys of employment also show no job gains since 2008. The annual American Community Survey and County Business Patterns survey both show declines in employment, while the Bureau of Economic Analysis also indicates that jobs have declined in West Virginia.

3 other surveys

If we take a look at just the establishment survey – which includes residents and non-residents employed at West Virginia businesses – the jobs picture is better but relatively poor compared to other states. Between the start of the Great Recession in December 2007 and February 2015, West Virginia only gained 400 jobs or 0.05 percent job growth. The United States, on the other hand, has experienced job growth of two percent over this period, adding 2.8 million jobs. While the establishment survey shows some spikes in job growth over the economic recovery in the spring of 2012 and 2014, employment seems to be on the downward trend. The state’s biggest job losses since the beginning of the recession have been in manufacturing (-9,800), construction (-5,900), and retail trade (-3,500),

 US vs WV

While the state has lost 1,900 jobs since 2008, the jobs losses have been mostly concentrated in the southern part of the state. Between 2008 and 2014, the Huntington-Ashland area lost 6,500 jobs, Charleston 4,500, and Beckley 1,400. Meanwhile, Morgantown has gained 6,400 jobs since 2008, the Wheeling area has gained just 300, and the Parkersburg-Vienna area has lost 1,000. 

West Virginia also ranks in the bottom in job growth and unemployment since the beginning of the recession. Among the 50 states, West Virginia ranks 37th in job growth and its unemployment rate was 1.4 percentage points higher in February 2015 than in December of 2007 – ranking it 42nd. West Virginia also has a higher unemployment rate than most states at 6.1 percent compared to the national average of 5.1 percent.

Job Ranking

There could be a number of reasons for the state’s weak job performance over the last couple of years. The shrinking of the state’s working age population, the growing reliance on a boom and bust natural resource-based economy, crumbing infrastructure and lack of broad-band connectivity, disinvestment in higher education or our state’s continuing disregard for social inclusion and environmental standards that improve the quality of life in the state.

While it is difficult to discern what is at the root of West Virginia’s recent economic woes, it’s clear that the “shale-boom” has yet to provide the state with a manufacturing renaissance or any significant job growth. The state has also not reaped any noticeable rewards for the hundreds of millions in corporate tax cuts since 2007 or the budget austerity that has weakened our ability to invest in our people and communities.

Instead of pursing trickle-down economics and a race to the bottom on environmental rules that keep us safe and promote our well being, our state needs to pursue policies that grow our economy from the middle-out and that make our state a better place to live, work, and raise a family.

Budget Beat – March 27, 2015

2016 Budget Becomes Law

After making several line-item vetos, on Monday Governor Tomblin signed the 2016 budget bill into law.

As we mentioned last week, legislators made changes to the budget bill, including increasing the amount borrowed from the state’s Rainy Day fund to about $23 million to balance the budget.

The governor’s vetos, however, reduce the amount taken from the Rainy Day Fund to about $15 million. To make the numbers add up, he cut back funding for higher education by $2.8 million, along with cuts to other programs. To see what other areas of the budget were vetoed, read Sean’s blog post.

Here’s more on the back and forth on cuts to higher education, and the final numbers, in this week’s Charleston Gazette.

West Virginia Losing Population

Recent U.S. Census numbers show that West Virginia, along with just five other states, lost population between July 1, 2013 and July 1, 2014. The loss of 3,300 people during that time frame gives the state the biggest decline in the nation, accounting for population size. Read more in today’s Charleston Gazette.

Congressional Scorecard on Poverty Voting

Want to know how your congressperson voted last year on measures to reduce poverty? A scorecard on West Virginia’s five congressional members shows a mixed bag, from A+ to C. Find out how your representatives voted on issues from increasing the federal minimum wage to the Paycheck Fairness Act here

House Approves CHIP Extension

In a bipartisan 392-37 vote yesterday, the U.S. House of Representatives passed legislation to extend funding for the Children’s Health Insurance Program (CHIP) and community health centers for two years. All three members of West Virginia’s delegation voted for the extension. CHIP covers about 8 million children from low- and middle-income families nationally and about 25,000 West Virginia children.

Governor Tomblin Exercises Veto Power over 2016 Budget

Yesterday Governor Tomblin announced his vetoes to the FY 2016 budget, which the legislature completed last week. As we went over here, the legislature increased the amount borrowed from the Rainy Day Fund to $22.9 million, in turn increasing appropriations above the governor’s recommendations in some areas, including higher education. With his veto, the governor has reduced the amount borrowed from the Rainy Day Fund to $15.5 million, and has reduced a number of appropriations throughout the budget.

Notably, the governor vetoed $2.8 million from higher education and $1.1 million from the State Police. Below is a table with the full list of the governor’s vetoes of the FY 2016 budget.

Agency

Line Item

Enrolled Budget

Vetoed Budget

Amount Vetoed

General Revenue

WV Development Office

WV High Tech Consortium

$300,000

$198,906

-$101,094

WV Development Office

Regional Contracting Assistance Center

$225,000

$208,215

-$16,785

State FFA-FHA Camp and Conference Center

Unclassified

$500,000

$0

-$500,000

State Department of Education

Hospitality Training

$319,005

$264,973

-$54,032

State Department of Education

Educational Program Allowance

$535,000

$516,250

-$18,750

State Aid for Schools

Adjustment

$718,168

$0

-$718,168

Education and the Arts Office of the Secretary

Educational Enhancements

$575,000

$200,000

-$375,000

Division of Health – Central Office

Primary Care Support

$6,000,000

$5,270,428

-$729,572

Division of Health – Central Office

Health Right Free Clinics

$3,000,000

$2,750,000

-$250,000

Division of Human Services

Children’s Trust Fund – Transfer

$300,000

$220,000

-$80,000

WV State Police

Personal Services and Employee Benefits

$59,511,081

$59,000,000

-$511,081

WV State Police

Vehicle Purchase

$2,377,614

$2,000,000

-$377,614

WV State Police

Capital Outlay and Maintenance

$2,250,000

$2,000,000

-$250,000

Department of Veterans’ Assistance

Personal Services and Employee Benefits

$1,876,828

$1,801,828

-$75,000

Department of Veterans’ Assistance

Unclassified

$200,000

$180,000

-$20,000

Department of Veterans’ Assistance

Veterans’ Field Offices

$288,345

$268,345

-$20,000

Department of Veterans’ Assistance

Veterans’ Nursing Home

$6,004,913

$5,941,038

-$63,875

Department of Veterans’ Assistance

Veterans’ Reeducation Assistance

$39,502

$29,502

-$10,000

Department of Veterans’ Assistance

Veterans’ Grant Program

$150,000

$100,000

-$50,000

Department of Veterans’ Assistance

Veterans Cemetary

$583,263

$373,263

-$210,000

New River Community and Technical College

Total

$5,676,500

$5,641,703

-$34,797

Pierpont Community & Technical College

Total

$7,664,596

$7,530,761

-$133,835

Blue Ridge Community and Technical College

Total

$4,949,710

$4,607,544

-$342,166

Eastern West Virginia Community and Technical College

Total

$1,887,174

$1,881,834

-$5,340

Southern West Virginia Community and Technical College

Total

$8,203,924

$8,203,924

$0

West Virginia Northern Community and Technical College

Total

$7,099,616

$7,075,033

-$24,583

West Virginia University – Parkersburg

Total

$10,094,237

$9,788,994

-$305,243

Bridgevalley community and technical college

Total

$7,739,898

$7,719,911

-$19,987

WVU – School of Medicine Medical School Fund

WVU-School of Health Sciences

$16,711,414

$16,163,439

-$547,975

WVU – General Admin Fund

Jackson’s Mill

$307,713

$247,549

-$60,164

Marshall University – School of Medicine

Forensic Lab

$415,000

$250,411

-$164,589

Marshall University – School of Medicine

Center for Rural Health

$275,000

$165,037

-$109,963

Marshall University – General Admin Fund

Luke Lee Listening Language and Learning Lab

$175,000

$105,000

-$70,000

WV School of Osteopathic Medicine

School of Osteopathic Medicine

$7,458,334

$7,008,276

-$450,058

Bluefield State College

Total

$5,823,680

$5,815,119

-$8,561

Shepherd University

Total

$9,921,556

$9,831,330

-$90,226

West Liberty University

Total

$8,198,329

$8,196,740

-$1,589

West Virginia State University 

Total

$10,733,691

$10,307,141

-$426,550

Special Revneue

Office of Secretary – Revenue Shortfall Reserve Fund

Medical Services Trust fund – transfer

$22,928,928

$14,792,331

-$8,136,597

Excess Lottery

Division of Human Services

Medical Services 

$16,422,140

$14,422,140

-$2,000,000

Budget Beat – March 20, 2015

Hits and Misses of 2015 Legislative Session

Midnight on Saturday marked the final moment of the 2015 Legislative Session. With new leadership in both the Senate and House of Delegates, there were a lot of initiatives introduced that we have been following with you over the past 60 days. Here’s a recap:

Good News
While the Senate passed Senate Concurrent Resolution (SCR) 13, to add West Virginia to the list of states calling for a constitutional convention to propose a balanced budget amendment to the U.S. Constitution, the House of Delegates did not bring the resolution up for a vote, killing it for this session.

A bill to weaken the collective bargaining power of unions, commonly known as Right to Work, was not taken up in either chamber.

Legislation to require drug testing of recipients of TANF benefits made it to second reading in the House but was then tabled, killing it for this session.

Bad News
A bill to create the Earned Sick Time Act had no traction and was not taken up by the Senate Labor Committee.

Mixed News
Changes were made to the state’s prevailing wage law, with Workforce West Virginia ordered to develop a new method of determining the prevailing wage rates. Until that process is completed, it is unclear how the changes will affect the wages of construction workers on state projects. The law also makes it so the new wage rates will only apply to public construction projects costing over $500,000. For projects less than that amount, the state’s prevailing wage will no longer apply.

An increase to the cigarette tax of $1.00/pack was attached to a bill that would have legalized the sale of fireworks in West Virginia. The bill took a wild ride in the session’s final days but ultimately died. Adding to the bill’s controversy was its language to lift indoor smoking bans for casinos and other establishments. Raising the state’s tobacco tax is long overdue but attaching it to this confusing legislation made it hard for anti-smoking groups to support.

capitol dome
Legislators Make Changes to Budget, Send it Back to Governor

This week the Senate and House made their changes to Governor Tombin’s 2016 budget.

Of particular note is their reduction in the governor’s cuts to higher education. It will be interesting to see what Governor Tombin will do with his line-item veto power. Read more in Sean’s blog post about what legislators proposed and where the money will come from.

Even with these positive changes, funding for higher education in West Virginia would still be below its 2008, adjusting for inflation. Read more in this week’s Charleston Gazette.

shifting costs graphic
ICYMI – A Softer Landing: Fighting the Resource Curse

Yesterday, Ted spoke at the Shale Symposium sponsored by the Federal Reserve Bank of Cleveland at Wheeling Jesuit University. The symposium covered early shale development, shale’s growth-to-boom phase, and its declining development-to-bust phase.

Ted’s presentation, “A Softer Landing – Fighting the Resource Curse”, described how creating a permanent mineral trust fund can help a state plan for a future after its energy reserves are depleted.

shale symposium
Selma Memory March in Charleston This Sunday at 3PM

This Sunday, March 22 at 3PM, there will be a march to mark the 50th anniversary of the Edmund Pettus bridge crossing in Selma. Marchers will gather at the Kanawha Blvd. River Sidewalk at Clendenin Street and cross to Magic Island Park where there will be music and speakers.

Selma anniversary

2016 Budget Update

Legislators approved the final FY 2016 budget earlier this week, officially bringing an end to this year’s legislative session. The legislature made a number of minor changes to the budget, but stuck largely to the governor’s proposal.

Most of the changes were a result of increased borrowing from the Rainy Day Fund. The governor’s original budget proposal called for borrowing $68 million from the Rainy Day Fund to balance the budget, but Governor Tomblin twice made adjustments, reducing the amount to $15.5 million. The legislature’s budget takes $22.9 million from the Rainy Day Fund, $7.4 million more than the governor’s recommendation, freeing up General Revenue funds that would have otherwise been appropriated to Medicaid. Adjustments to the School Aid Formula also freed up $2.1 million.

With the additional borrowing from the Rainy Day Fund and other adjustments, the legislature was able to restore some of the governor’s proposed budget cuts. The legislature restored $7.4 million of his $12 million in cuts to higher education, while fully restoring cuts to children and family programs like Family Resource Networks.

Below is a table listing all of the differences between the legislature’s final budget and the governor’s proposal. Also available here is a complete side-by-side comparison of the FY 2016 budget, from the governor’s adjusted proposal to the final product. 

While the legislature has completed its work on the budget, the process is not complete. The governor has line-item veto power over the budget, and may veto some of the legislature’s increases in the coming days. 

Agency

Line Item

Governor’s Proposal

Final

Difference

General Revenue

 

 

 

 

Senate

Current Expenses and Contingent Fund

$526,392

$276,392

-$250,000

Senate

Expenses of Members

$620,000

$370,000

-$250,000

House

Current Expenses and Contingent Fund

$4,429,031

$3,929,031

-$500,000

Dept of Agriculture

WV Food Banks

$115,000

$140,000

$25,000

Division of General Services

Capital Outlay Repairs and Equipment

$13,500,000

$4,500,000

-$9,000,000

WV Development Office

Advantage Valley

$59,546

$0

-$59,546

WV Development Office

WV High Tech Consortium

$198,906

$300,000

$101,094

WV Development Office

Regional Contracting Assistance Center

$208,215

$225,000

$16,785

State FFA-FHA Camp and Conference Center

Total

$475,684

$1,250,000

$774,316

State Department of Education

Hospitality Training

$264,973

$319,005

$54,032

State Department of Education

Educational Program Allowance

$416,250

$535,000

$118,750

State Aid to Schools

Basic Foundation Allowance

$1,605,584,897

$1,603,265,377

-$2,319,520

State Aid to Schools

Less Local Share

-$456,068,638

-$454,137,621

$1,931,017

State Aid to Schools

Adjustment

-$1,865,133

$718,168

$2,583,301

State Aid to Schools

Total Basic State Aid

$1,147,651,126

$1,149,845,924

$2,194,798

State Aid to Schools

Teachers’ Retirement System

$66,428,000

$66,486,618

$58,618

Dept of Education and the Arts – Office of the Secretary

Educational Enhancements

$200,000

$575,000

$375,000

Division of Health – Central Office

Primary Care Support

$5,270,428

$6,000,000

$729,572

Division of Health – Central Office

Sexual Assault Intervention and Prevention

$0

$125,000

$125,000

Division of Health – Central Office

Health Right Free Clinics

$1,933,609

$3,000,000

$1,066,391

Consolidated Medical Service Fund

Behavioral Health Program – Unclassified

$72,175,437

$69,725,365

-$2,450,072

Division of Human Services

Medical Services

$488,417,798

$466,150,331

-$22,267,467

Division of Human Services

Family Resource Networks

$1,612,000

$1,762,464

$150,464

Division of Human Services

Domestic Violence Legal Services Fund

$370,000

$400,000

$30,000

Division of Human Services

Grants for Licensed Domestic Violence Programs and Statewide Prevention

$2,142,100

$2,500,000

$357,900

Division of Human Services

Children’s Trust Fund – Transfer

$220,000

$300,000

$80,000

Dept of Military Affairs and Public Safety – Office of the Secretary

WV Fire and EMS Survivor Benefit

$200,000

$400,000

$200,000

Division of Corrections – Correctional Units

Information Technology Services

$0

$100,000

$100,000

WV State Police

Total

$96,668,422

$100,667,272

$3,998,850

Division of Criminal Justice Services

Child Advocacy Centers

$1,502,036

$1,702,108

$200,072

Dept of Veterans’ Assistance

Total

$9,601,389

$10,342,764

$741,375

Division of Veterans’ Affairs – Veterans’ Home

Total

$1,161,272

$1,307,530

$146,258

West Virginia Council for Community and Technical Education

Total

$65,096,617

$66,352,867

$1,256,250

Higher Education Policy Commission

Total

$339,539,262

$345,735,930

$6,196,668

Road Fund

 

 

 

 

Division of Highways

Maintenance, Contract Paving and Secondary Road Maintenance

$40,000,000

$48,500,000

$8,500,000

Division of Highways

Courtesy Patrol

$0

$3,000,000

$3,000,000

Special

 

 

 

 

State Board of Ed – FFA-FHA Camp and Conference Center

Total

$300,000

$1,963,917

$1,663,917

Division of Health  – Vital Statistics

Equipment

$185,954

$785,954

$600,000

Division of Human Services – Medical Services Trust Fund

Medical Services

$48,457,277

$55,858,205

$7,400,928

WV Division of Corrections – Parolee Supervision Fees

Total

$1,002,206

$1,852,206

$850,000

WV State Police – Motor Vehicle Inspection Fund

Total

$2,596,180

$3,271,066

$674,886

WV State Police  – Central Abuse Registry Fund

Total

$474,921

$508,348

$33,427

Office of Secretary – Revenue Shortfall Reserve Fund

Medical Services Trust fund – transfer

$15,528,000

$22,928,928

$7,400,928

Lottery

 

 

 

 

Bureau of Senior Services – Lottery Senior Citizens Fund

Transfer to Division of Human Services for
   Health Care and Title XIX Waiver for
   Senior Citizens

$20,628,757

$20,503,026

-$125,731

Excess Lottery

 

 

 

 

Lottery Commission – Distributions to Statutory Funds and Purposes

Licensed Racetrack Regular Purse Fund

$14,159,198

$12,159,198

-$2,000,000

Division of Human Services

Medical Services

$14,422,140

$16,422,140

$2,000,000