Why Do We Want West Virginia to be Known as the Place for Cheap Tobacco?

Calling for a $1/Pack Increase in the Cigarette Tax

Yesterday, a diverse group of advocates met to call for a long-overdue increase in the cigarette tax. West Virginia has the highest adult smoking rate in the nation and one of the lowest cigarette taxes. Raising the tax by $1/pack would still put the state’s rate below the national average while providing about $135 million in much-needed revenue to help balance West Virginia’s budget.

Read more in the Huntington Herald-Dispatch, the Charleston Gazette-Mail, the State Journal and from WV Metro News

Budget Watch

With May right around the corner, West Virginia is entering another month without a budget for the quickly approaching fiscal year.

This week, WVCBP board president Renate Pore reminded legislators that there’s no more important priority than investing in the state’s young people. Here’s her op-ed in this week’s Charleston Gazette.

The current budget situation is causing concern beyond our borders. Last week, Standard & Poor’s announced it was lowering the state’s bond rating from AA to AA- due to the ongoing budget problems.

Ted was quoted in this State Journal article about the issue: “I think (the report) highlights that West Virginia has a structural revenue problem that it has failed to address.”


Support for WV Future Fund

Last week Brookings released a report, Permanent trust funds: Funding economic change with fracking revenues, which highlighted why states should design and implement policies like the West Virginia Future Fund.

The report stressed the importance of a “reasonable” gas severance tax, part of which should go into a state trust fund.

“This study not only adds additional credibility to our research on creating a permanent mineral trust fund in the state, but it makes clear that we need to fully fund our state’s Future Fund in order to improve the state’s long-term fiscal health and diversify our economy,” said Ted Boettner in a news release on the report.

The West Virginia legislature passed a bill to create the West Virginia Future Fund in 2014. The bill was amended to remove reliable funding mechanisms, however, and to date has failed to be funded.

Here’s our 2012 report that provides recommendations on how to make the West Virginia Future Fund successful.

Here’s more in the State Journal on the impact to West Virginia’s severance tax revenue projections due to the decline in energy prices and how a healthy West Virginia Future Fund could help buffer the state from future market volatility.

Used with permission from the State Journal

Tax Increase Success Stories

From the Center on Budget and Policy Priorities:

California voters in 2012 raised income tax rates for the state’s wealthiest residents, as well as the state’s sales tax, and dedicated the new revenue to education, which the state had cut deeply after the recession hit. Those changes helped California raise K-12 funding per student by $1,800, as of last year, and better target those dollars to communities with the greatest need, likely improving the state’s workforce down the road.

Minnesota in 2013 similarly raised income tax rates for its wealthiest residents, enabling the state to make a number of promising investments in education. These include providing full-day kindergarten in all public school districts, helping more low-income children afford preschool programs, and offering college scholarships to more low- and middle-income residents.

Read the full CBPP blog post.

West Virginia Training for Trainers – Apply by May 8

A team of West Virginia trainers and the Our Children Our Future Campaign are teaming up with Training for Change to lead a Training for Trainers retreat this summer. Participants will develop a stronger sense of training tools, approaches and choices that will work for them to be most powerful and useful in their work.

This workshop is designed for facilitators, trainers, organizers, teachers and community leaders who convene groups, including those who have been facilitating and training for years and those that are new to these skills. It will prioritize the attendance of a range of participants with regard to location, organization, age, race and gender and accept 26 West Virginians from across the state.

Full and partial scholarships are available. For more information contact Katey Lauer. Go here to apply.

Has West Virginia’s Budget Grown $564 Million in 5 Years?

Earlier today, Delegate Patrick Lane issued a press release calling for more budget cuts as the solution to West Virginia’s budget gap. As part of his argument, Delegate Lane made the misleading claim that the state’s general revenue fund has grown by $564 million in 5 years, which is a reflection of “unchecked” government spending.

However, Delegate Lane’s math only works by carefully choosing particular years to compare, and ignoring their context. In reality, General Revenue, and base budget spending is down nearly across the board, which shouldn’t be surprising after multiple years of budget cuts.

As seen in this chart from his Twitter page, Delegate Lane is comparing General Revenue Spending from FY 2010 to FY 2015. And the chart does show a General Revenue Fund increase of $564 million, from $3.74 billion in FY 2010 to $4.31 billion in FY 2017. But FY 2010 (and FY 2011) were unusual budget years. During the recession, states, West Virginia included, received an infusion of cash from the federal government from the Recovery Act, which they used to prevent budget cuts and back fill their budgets. West Virginia was no different. In those years, the legislature made large cuts to the General Revenue budget, and “backfilled” it with federal stabilization funds.

Two of the major areas that were cut in General Revenue and “backfilled” with federal stabilization funds were State Aid to Schools and Higher Education. A total of $217.9 million was cut from General Revenue funding for Higher Education and State Aid for Schools in FY 2010 and FY 2011, and replaced with federal stabilization funds. In FY 2012, when the federal stabilization funds were gone, General Revenue Funding returned to normal.




In addition, during those years, the Federal Match Rate for Medicaid increased as part the federal government’s efforts to aid states. West Virginia was allotted over $500 million in extra federal funding for Medicaid from FY 2009 to FY 2011, allowing even further General Revenue reductions. In total, West Virginia was able to cut the budget by $322.7 million in FY 2010 and $183.2 million in FY 2011, and replace it with federal ARRA funds.


By FY 2012, the federal stabilization funds were mostly exhausted, and the state’s budget was back to normal. And most of the $564 million increase happened between FY 2010 and FY 2012. But it wasn’t due to the state’s budget growing out of control, it was due to the rollback of federal stimulus money. Including the backfill stimulus money, the general revenue fund increased by $241 million, less than half of Delegate Lane’s $564 million figure. That’s a five-year increase of only 5.9%, which is not very remarkable. According to the Bureau of Economic Analysis, total state and local government expenditures have grown an at average annual rate of 4.5% per year since 2000.

And in the five years since the expiration of the stimulus funds, the state’s General Revenue budget has hardly grown at all. Compared to FY 2012, spending in Governor Tomblin’s FY 2017 proposal is down nearly across the board, with the only increases coming from the Supreme Court, Medicaid, and Senior Services, which wasn’t funded from General Revenue in FY 2012. Overall General Revenue has only increased by $184 million from FY 2012 to FY 2017, an increase of only 4.4 percent over 5 years. That’s less than one percent a year, well below inflation.


In fact, when considering the whole base budget, the increase over the past five years is even smaller, at just $115 million, or 2.5%, as lottery revenues have also declined.


And it should be noted that DHHR’s increase is due to Medicaid, but overall Medicaid spending isn’t growing as fast as the chart implies. Instead, General Revenue’s share of state Medicaid spending is increasing, though, total Medicaid spending is on the rise.

So in short, Delegate Lane’s claim that the state budget has experienced unchecked growth of $564 million is only true by picking a starting point when the General Revenue Fund was artificially low. When federal stabilization funds are accounted for, the budget’s growth over that time is pretty unremarkable. And since then, nearly every area of the budget has gone down substantially.

Checking in on West Virginia’s Struggling Economy (March 2016 Edition)

West Virginia’s economy has not been faring well lately, with reports indicating the state has slipped back into a recession. Nationally, the economy has seen some relatively strong performances recently, but low energy prices and declining coal production have hurt mining states like West Virginia. Here a some indicators demonstrating the state’s weakening economy.

West Virginia’s unemployment rate for March 2016 was 6.5%, well above the national average of 5.0%. West Virginia’s rate ranked below only Alaska, D.C., and Illinois for the highest rate in the country. West Virginia’s unemployment rate has increased by 0.3 percentage points in the past three months, while the national rate has been unchanged.


The pace of West Virginia’s decline has picked up recently, even as the national economy grows. Employment in West Virginia has fallen by 500 over the past three months, and the state has lost 5,200 jobs since March of last year. West Virginia is one of only six states to lose jobs from March 2015 to March 2016, and nationally, the economy added 2.8 million jobs over that time period.


Unsurprisingly, the mining industry is the major source of job loss in West Virginia in the past year. Employment in the mining and logging sector in West Virginia has fallen by 5,700 jobs in the past year, a decline of 20.5%. No other industry has come close to the losses of the mining sector. Both manufacturing and wholesale trade struggled losing 700 jobs each in the past year, a decline of 1.5% and 3.1% respectively, while the construction, transportation and utilities, information, and professional and business services all experienced losses of 500 jobs or fewer in the past 12 months.

In contrast, the retail trade, financial activities, and leisure and hospitality industries all saw employment growth over 1% since last year. Employment in the retail trade industry increased by 1,000 jobs, in the leisure and hospitality industry by 800 jobs, and in the financial activities industry by 500 jobs. Employment also increased by 800 jobs in the education and health services industry, while public sector employment at all levels of government increased by 600 jobs, a 0.4% increase over last year.




One Way to Make Tax Day Easier for Working Families

Tax Day Relief for Working Families

Yesterday at the state Capitol, legislators joined the Invest in Working Families Coalition to call for support for a West Virginia Earned Income Tax Credit (EITC). Delegates Rohrbach (R-Cabell) and Guthrie (D-Kanawha) spoke about the bill they sponsored during the 2016 Legislative Session.

“Over 2,900 families in my district get up every day and work jobs that pay low wages. They are struggling to make ends meet until a better employment opportunity comes along,” stated Delegate Matthew Rohrbach. “A state Earned Income Tax Credit sends a clear message of dollars and common sense that we support their work and desire to move up the economic ladder.”

“This is as kitchen table as it gets in my district,” said Delegate Nancy Guthrie. “$325 may not seem like a lot but for West Virginians working low-paying jobs, that money will be spent for something important. In District 36, over 4,200 will benefit while spending that money in our local economy. A state EITC provides immediate results now as well as critical investment in West Virginia’s next generation.”

A West Virginia EITC would benefit over 141,000 working families. The tax credit can only be claimed by people who work. Over 160,000 West Virginia children would be helped.

The amount of the tax credit varies based on family income and size. A single mother with two children who works a full-time minimum-wage job could keep over $800 more of her earnings because of a state EITC. A family of four making $36,000 per year could keep over $400 more.

Here’s more in the Huntington Herald-Dispatch and the State Journal.


The Facts Behind “Tax Freedom Day”

The Tax Foundation’s annual “Tax Freedom Day” report once again left a strikingly misleading impression of tax burdens – showing an average federal tax rate across the United States that’s likely higher than the tax rate that 80 percent of U.S. households actually pay.

Here’s are the facts from the Center on Budget and Policy Priorities.

Time for More Revenue, Not More Cuts

No word yet on when Governor Tomblin will call a special session of the legislature to address the ongoing budget crisis. In an op-ed this week, Ted lays out the reasons why now is not the time for more budget cuts.

Legislators need to look beyond another round of budget cuts and consider a number of options this spring when they reconvene, including closing corporate tax loopholes, making the wealthy pay their fair share, and enacting higher taxes on things that are making people unhealthy, like tobacco and sugary soft drinks.

Read Ted’s op-ed here.

Slumping Natural Gas Prices Key Reason for Budget Shortfall

While some have blamed the state’s budget crisis on the decline of coal severance taxes, declining natural gas severance taxes are also taking their toll. The decline in mineral extraction, along with a weak economy and major tax cuts phased in between 2006 and 2015, is the central driver of the state’s weak revenue growth over the past several years and into the future. Here’s much more in Ted’s blog post.

Here’s more in this week’s State Journal on balancing the state budget in these challenging times of reduced severance tax revenue.

And here’s an editorial in this week’s Charleston Gazette calling for leadership to guide the state as it enters a post-coal economy. 

Learn More About the Reclaim Act

The Alliance for Appalachia’s Economic Transition Team is hosting a webinar to focus on the RECLAIM Act, which was introduced by Congressman Hal Rogers (KY) in February and is the legislative vehicle moving forward the reclamation piece of the POWER Plus Plan. Congressman Evan Jenkins is a cosponsor.

This webinar will give an overview of RECLAIM and its potential impact on Central Appalachia and other regions with coal-impacted communities. There will be a Q&A session at the end of the webinar.

Register here.

Join Us this Summer! Apply Now for SPI 2016!

Join us for the first-ever Summer Policy Institute this July at West Virginia Wesleyan College!

Applications are due April 30, 2016. Join us for this tuition-free weekend!

Happy Friday!

Natural Gas Biggest Driver of Shrinking Severance Taxes

While some have blamed the state’s budget crisis on the decline of coal severance taxes, declining natural gas severance taxes are also taking their toll. The decline in mineral extraction, along with a weak economy and major tax cuts phased in between 2006 and 2015, is the central driver of the state’s weak revenue growth over the past several years and into the future.

In January 2015, the governor projected that total severance tax collections (not including local share) for the current fiscal year of 2016 would be $495 million (see graph below). This included $265 million in coal, $178 million in natural gas, and $52 million in oil, natural gas liquids (NGL), and other rock materials (limestone, gravel, sand, etc.). In January of 2016, the governor revised this estimate down by $227 million. About 70 percent of this decline, or $160 million, was attributed to shale gas and oil development (aka fracking) – including $120 million for natural gas and $40 million for oil and NGLs. The decline in coal severance taxes made up just $67 million, or 29 percent, of the projected decline in severance tax collection for FY 2016.


The picture for the upcoming budget year (FY 2017) is much the same. The governor’s revenue estimate for coal severance taxes for FY 2017 was about $62 million less  – a decline of 25% – in January 2016 compared to his January 2015 estimate. For natural gas, it was $139 million less, and for oil and for natural gas liquids (+ other rocks)  it was $45 million less. Natural gas, oil, and natural gas liquids make up almost 3/4 or 75% of the decline in severance tax projections between 2015 and 2016.  


The sharp decline in natural gas severance tax collections isn’t due to production – which reached an all time high of 1.3 trillion cubic feet in 2015 – but the steep fall in national natural gas prices which is the result of an oversupply of natural gas in the United States. This abundant and cheap natural gas is also a main driver of the state’s decline in coal production, along with reduced demand and low prices for metallurgical coal, declining productivity, and new clean energy regulations

One thing is clear from the steep drop in natural gas prices – it hasn’t hurt production. This means that the state should consider whether it levies an adequate severance tax on natural gas. As Sean has pointed out, severance taxes a have small impact on production but a big impact on increasing revenue. When the legislature reconvenes this spring to close the $558 million budget gap for FY 2017, it should consider raising the natural gas severance tax to help ensure that the state funds important priorities such as higher education.

Lunch and Learn With Us This Monday!

Lunch and Learn

Join the WVCBP and the WV Covenant House on Monday, April 11 for Lunch and Learn!

Bring your lunch and join us from 11:30AM – 1:00PM in a discussion about a balanced budget approach that includes an investment in shared prosperity. Lunch and Learn will take place at the WV Covenant House office on 600 Shrewsbury Street in Charleston.

Email info@wvpolicy.org or check out Facebook for more information!

Your Guide to the State Budget

Do you have questions about how the state budget works but were afraid to ask? Our second edition “Your Guide to the State Budget” will answer them!

Get your free copy by sending your address to info@wvpolicy.org.

Staff is available to present to your organization or civic group and supply free copies of the guide. Just let us know when!

2016 Budget Primer cover
Keeping Predatory Lenders Out of West Virginia

West Virginians are part of the 90 million people who live in states where payday lending is illegal. These high-interest loans cause people to fall into a debt trap, making their financial situation even worse.

This week the WVCBP was proud to join other payday-loan-free states in calling on Consumer Financial Protection Bureau Director Cordray to submit a strong rule to Congress that will continue to keep predatory lenders out of our state.

Thanks to our coalition partners who signed the letter we delivered to Director Cordray. And thank you to WV Citizen Action Group for coordinating a online petition that collected over 100 signatures for us to deliver as well! 

Social Democracy, Not Socialism

From Social Democracy by Lane Kenworthy: “The notion of a social democratic United States will strike some observers of US politics as a pipe dream. But consider this: in the realm of public social policy, the distance between the United States today and Denmark or Sweden today is smaller than the distance between the United States a century ago and the United States today. In the past one hundred years we’ve put in place a host of public programs that contribute to economic security, opportunity, and shared prosperity. Getting closer to the good society doesn’t require a radical break from our historical path. It simply requires continuing along that path. In all likelihood, that is exactly what we will do.”

SNAP Supports Work

In January, West Virginia reinstated a federal requirement that SNAP recipients must work 20 hours a week or lose their benefits. As part of this nine-county case study, able-bodied adults without dependents between the ages of 18 and 49 are affected. Here’s a glance at demographics of SNAP recipients:

Register for the Our Children Our Future Summit and Annual Meeting!

It’s time to register for this year’s Our Children Our Future Summit and Annual meeting.

April 22, 9:30 AM – 4:00 PM, Pierpont College, Fairmont, WV

  • Learn, discuss, and debate about the policies proposed for the Commitment to OCOF: our long-term legislative platform.
  • VOTE on which policies will be included in the Commitment – before statewide polling opens!!!
  • Design the OCOF strategy for the year
  • VOTE for our 2016/2017 steering committee 
  • Get involved in initiatives like Student Chapters, Leadership and Organizing Trainings, Shared Use & Voter Engagement
  • and much, much more

Registration open now!

Deadline Extended: Apply Now for SPI 2016!

Join us for the first-ever Summer Policy Institute this July at West Virginia Wesleyan College!

Applications are due April 30, 2016.

For more information, please call Tara at 304-720-8682 or go here.

No Joke: Eight Ways to Help Balance the Budget

Eight Ways Legislators Can Balance the Budget

West Virginia does not yet have a budget for the upcoming fiscal year which starts on July 1. Governor Tomblin is expecting to call legislators in for a special session but no date has been announced. At issue is how to bridge the $239 million budget shortfall. The governor, the Senate and the House have all presented different solutions, with the House making no recommendations that would increase revenue.

Cuts alone will cause further damage to the state’s economy. The state has already endured years of cutbacks, especially to higher education. By solving the budget shortfall with only cuts, the Governor’s office predicts hundreds of teachers will be laid off, the Promise scholarship would be ended and institutions would have to shut their doors.

Here are our recommendations on how to balance the budget without forcing another round of draconian cuts.

Here’s Ted on West Virginia Public Broadcasting discussing our latest report.

Want to know more about a balanced budget approach that includes an investment in shared prosperity? Join our staff on Monday, April 11 from 11:30AM – 1:00PM for Lunch and Learn at the West Virginia Covenant House, 600 Shrewsbury St, Charleston.

Bring a lunch and join the conversation! Please RSVP here.

Lucy Boettner makes sushi at pre-school.

Quick Action: Help Keep Payday Lenders Out of West Virginia

West Virginia has a proud history of keeping predatory payday lenders out of our state. This spring the Consumer Financial Protection Bureau (CFBP) will issue a rule to regulate the payday lending industry.

Payday lenders are aggressively lobbying the CFPB and Congress to weaken and delay the rule. Please add your name to this letter that will be hand delivered to CFPB Director Cordray urging him to issue a strong payday lending rule.

Help protect West Virginia, and the rest of the nation, from the debt trap caused by these predatory lenders! Sign the petition here.

WVU Law National Energy Conference – Free, Register by April 4

For generations, West Virginia has been closely linked to its mainstay economic drivers such as coal. With sharp declines in coal production, however, there is a pressing need to both continue to diversify the state’s economy and step up to protect West Virginia’s most significantly impacted communities. While a few national policymakers are beginning to recognize the need for addressing the devastating impacts being borne by coal communities arising from global energy transitions, more work is needed.

West Virginia’s needs must be central in these discussions to help shape the policy response and strategies. This conference will begin to examine the effect of trends in the coal industry, the economy-wide repercussions within Central Appalachia, and possible solutions for West Virginia that would put the state and its people on our most resilient path forward.

This free, one-day conference on April 8 features speakers from industry, academic institutions, public policy organizations, and environmental groups, highlighted by keynote speaker Senator Jay Rockefeller.

The Conference is presented by WVU’s John D. Rockefeller IV School of Policy and Politics and WVU Law’s Center for Energy & Sustainable Development

The conference is free, but registration is requested for lunch.

Register for the Our Children Our Future Summit and Annual Meeting!

It’s time to register for this year’s Our Children Our Future Summit and Annual meeting.

April 22, 9:30 AM – 4:00 PM, Pierpont College, Fairmont, WV

  • Learn, discuss, and debate about the policies proposed for the Commitment to OCOF: our long-term legislative platform.
  • VOTE on which policies will be included in the Commitment – before statewide polling opens!!!
  • Design the OCOF strategy for the year
  • VOTE for our 2016/2017 steering committee 
  • Get involved in initiatives like Student Chapters, Leadership and Organizing Trainings, Shared Use & Voter Engagement
  • and much, much more

Registration open now!


Deadline Extended: Apply Now for SPI 2016!

Join us for the first-ever Summer Policy Institute this July at West Virginia Wesleyan College!

Applications are due April 30, 2016.

For more information, please call Tara at 304-720-8682 or go here.

As 2016 Legislative Session Wraps up, Budget Gap Deepens

Recap of the 2016 Legislative Session

As the dust settles from the 2016 Legislative Session, here’s a look at some of the bills that were passed, and some that weren’t.

Here are some highlights:

The legislature passed, and the governor signed, HB 4013 that requires voters to present an ID to vote. While voter ID laws have been shown to do more to suppress turnout than to stop cases of voter impersonation, the bill that emerged was quite watered down. It also established a “Motor Voter” program where anyone getting a driver’s license would automatically be registered to vote.


On Friday, the House passed HCR 36 which calls for opening up the U.S. Constitution for the purpose of passing a Balanced Budget Amendment. On Saturday, the last day of the session, the Senate took up HCR 36 and passed it as well. This makes West Virginia the 28th state to pass such a resolution. 34 states must take similar action in order for Congress to be petitioned to call an Article V Convention.

Once a convention occurs, 38 states would have to approve any amendments passed. Here’s more on this dangerous resolution.

Thank you to the staff of the ACLU-WV and to Betty Rivard for all of your help with outreach and education on this important issue.

For much more on what bills made it through the session, check out Sean’s blog post for a full recap.

Budget Bumped to Special Session

As per tradition, legislators met this week, immediately following the end of the regular session, to work out differences between the budget bills passed by the House and Senate. Legislators were not able to agree on a budget bill and it is expected that Governor Tomblin will call a special session some time in April. The fiscal year that the budget would cover begins July 1.

On Tuesday, Governor Tomblin’s office released revised revenue figures that show the state’s budget gap has grown even larger than previous projections. Revenues are down an additional $92 million, for a total of $239 million. Since the governor has vowed to veto any budget bill that takes money from the Rainy Day Fund, and the House of Delegates has refused to consider any tax increases, this could be a very interesting special session. Here’s much more in Ted’s blog post including some much-needed solutions to this worsening situation.

Federal Assistance for Coalfield Communities

This week the Obama Administration announced $65.8 million in funding is available from its Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) program.

The announcement came from the Appalachian Regional Commission (ARC) and the U.S. Economic Development Administration (EDA).

According to the ARC, the goal is “to develop new strategies for economic growth and worker advancement for communities that have historically relied on the coal economy for economic stability.”

Funds are available for:

  • Developing projects that diversify local and regional economies, create jobs in new and/or existing industries, attract new sources of job-creating investment and provide a range of workforce services and skills training;
  • Building partnerships to attract and invest in the economic future of coal-impacted communities;
  • Increasing capacity and other technical assistance fostering long term economic growth and opportunity in coal-impacted communities.

For more information, or to apply, go here.


RECLAIM Act Aims to Help Coalfields

Late last year, Representative Evan Jenkins cosponsored the RECLAIM Act and this week he posted this column on his website to explain what the Act would do and how this bipartisan bill would help struggling coalfield families.

The RECLAIM Act: Revitalizing the Economy of Coal Communities by Leveraging Local Activities and Investing More, is sponsored by by Congressmen Hal Rogers (R-Ky.), Matt Cartwright (D-Pa.), Evan Jenkins (R-WV.), Don Beyer (D-Va.), and Morgan Griffith (R-Va.).

It would release $1 billion, $200 million a year for five years, from the Abandoned Mine Lands fund to assist Appalachian communities hard hit by job losses in the coal industry.


Spread the Word: Apply Now for SPI 2016!

Join us for the first-ever Summer Policy Institute this July at West Virginia Wesleyan College!

Applications are due April 1, 2016.

For more information, please call Tara at 304-720-8682 or go here.


Revised Estimates Highlight Need for Additional $92 Million in Revenue

On Tuesday, Governor Tomblin revised his estimates for the FY 2017 General Revenue Fund Budget. Since the legislature failed to pass the state budget during the regular session, the governor is expected to call a special session sometime this Spring to pass a budget for FY 2017.

Altogether, the FY 2017 revised revenue estimates for the state’s General Revenue Fund decrease revenues by about $239 million for FY 2017, or from $4.33 billion to about $4.09 billion. About two-thirds, or $147 million, of the lower revenue estimates was due to the legislature’s failure to adopt several of the governor’s proposed revenue measures. These included:

  • Increasing tobacco products taxes by $78 million: This legislation included increasing the cigarette tax from 55 cents to $1 per pack ($71.5 million), increasing the wholesale price tax on other tobacco products from 7% to 12% ($4.7 million), and a 7.5 cent per milliliter tax on electronic cigarettes ($1.8 million).
  • Enacting a sales tax on telecommunication services ($60 million)
  • Eliminating sales and use tax exemption for highways purchases for one year ($9.0 million): The governor’s bill would have temporarily suspended the annual transfer of sales tax revenue to the State Road Fund, based on a formula tied to the value of contract purchases in FY2016, and moved the revenue to the General Revenue Fund. 

According to the governor, the remaining $92.4 million in decreased revenue for FY 2017 was due to “downward pressure on energy prices, and less economic growth than originally forecast for both the national and state economy.”

revied grf estimatesThe downward slide in estimated personal income tax collections is expected to be $20.5 million below original estimates, while the estimated decline in severance taxes is expected to be $17.6 million below the governor’s original estimates. Most surprising is the large drop in expected corporate income taxes, declining by over 17 percent or $28.6 million. 

At $137.5 million, the state’s corporate net income and business franchise collections will be at an all-time low in FY 2017 if the revised estimates are realized. While this is largely due to the elimination of the business franchise tax and the reduction of the corporate net income tax rate from 9% to 6.5% in 2015, it highlights that the tax cuts failed to spur any supply-side effects and that these business tax cuts have made it much harder to fund crucial programs and services. At its peak in 2008 (the same fiscal year that the tax reduction went into effect), these two taxes accounted for $388 million in General Revenue Funds. In 1990, they accounted for over 12 percent of the General Revenue Fund budget compared to less than four percent today.

 COrp taxes low

When the legislature reconvenes in early Spring to pass the state’s FY 2017 budget, it is clear that lawmakers will need to adopt additional revenues to avoid more harmful cuts in essential services and programs. As we highlighted in our recent analysis of the state’s budget this year, there are a number of avenues lawmakers could take to raise additional revenue in addition to what the governor is proposing, including expanding the sales tax to more personal services, modernizing the state’s personal income tax, adopting a higher tax on natural gas liquids, and scaling back or eliminating lottery funds subsidies.

When looking at revenue options, lawmakers should also consider taking a balanced approach that considers how tax increases would impact low- and middle-income families who already pay a higher share of their income in state and local taxes than the state’s wealthiest residents. This could include pairing any sales tax or sin tax increase with a refundable state Earned Income Tax Credit that would not only help balance out the negative impact of these regressive taxes but also help boost labor force participation, reduce poverty, and lead to better social and economic outcomes.


Recap of 2016 Legislative Session

With the legislature adjourned sine die (or without assigning a day for further meeting for those needing all state business to be conducted in English,) now’s  a good time to look back at some of the bills made into law this past session. Here’s a quick recap of some of the major bills passed by the legislature, as well as some smaller bills with a fiscal impact. Notable exceptions to the list include the budget, which the legislature adjourned without passing, which means the governor will have to call them back into a special session to work on the budget.

  • SB 1  created a Right to Work law in West Virginia, which prohibits unions and employers from including a provision in contracts that requires employees who benefit from union representation to pay for their share toward those costs. Despite promises, it is unlikely that Right to Work will grow West Virginia’s economy.
  • SB 6 sets up a pilot program to drug test TANF recipients. While such programs are sold as a way to address substance abuse and save the state money, they have largely failed to achieve either goal.
  • SB 293 reauthorizes the Neighborhood Investment Act, which allows designated charitable organizations to apply for tax credit vouchers, which they can distribute to businesses and individuals who contribute to them. The voucher can total up to $3 million in tax credits.
  • SB 298, or the Brunch Bill, allows local governments to hold a referendum on allowing the sale of alcohol by certain retailers before 10:00 am on Sundays.
  • SB 419 will expire the Workers Comp Tax on coal and natural gas, once the liability in the Workers Comp Debt Fund is determined to be met.
  • SB 558 allows the governor to borrow up to $50 million from the Rainy Day Fund in order to maintain the solvency of Unemployment Compensation Fund.
  • SB 582 provides a refundable tax credit for motor fuel sold for use or consumed in railroad diesel locomotives. The credit is limited to $4.3 million.
  • SB 619 requires sunset provisions for all future regulatory rules and requires economic impact statements and other information to be submitted along with proposed rules. The Department of Administration was unable to determine the bill’s fiscal impact.
  • HB 2110 clarifies that the manufacturing investment tax credit and special valuation for capital additions applies to small arms manufacturing, as well as lowers the minimum capital investment requirement for salvage valuation treatment from $50 million to $1 million for small arms manufacturers. According to the Tax Department, the bill has a minimum fiscal impact, due to the lack of small arms manufacturers located in WV.
  • HB 2897, the Young Entrepreneur Reinvestment Act, exempts individuals under 35 years old from paying the initial filing fee of $100 for a new business and the $25 annual filing fee for two years. The lost revenue would equal about $250,000.
  • HB 4005 repeals the state’s Prevailing Wage, which is the minimum wage paid to construction workers on state-funded projects. After much debate, the bill was passed without a fiscal note, despite its intention to save the state money. Research suggests, however, that there will not be any significant savings.
  • HB 4009 gives county commissions the authority to submit road and bridge construction projects to the Commissioner of Highways, and authorizes county commissions to impose a county transportation sales and service tax and a county use tax, up to 1%, to finance the construction.
  • HB 4013 enacts a Voter ID law, requiring voters to show a form of ID before they can vote. While the bill is considerably weaker than Voter ID laws in other states, it addresses a problem, voter impersonation, that is exceedingly rare, and Voter ID laws in general have been shown to reduce turnout among minorities.
  • HB 4145 allows individuals to carry a concealed firearm without a permit, but also includes a tax credit of up to $50 for the cost of a concealed weapon safety course. According to the Tax Department, the tax credit could cost up to $1.5 million.
  • HB 4334 gives advance practice registered nurses more authority to provide healthcare services.
  • HB 4377 eliminates the exemption from hotel occupancy taxes on rental of hotel and motel rooms for thirty or more consecutive days. The bill was passed without a fiscal note.
  • HB 4612 allows counties and municipalities to finance road construction projects with Tax Increment Financing districts.