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

Budget Beat – March 13, 2015

Senate Passes SCR 13 ~ Calls for a Convention of the States to Pass Balanced Budget Amendment

After debate in the Senate Judiciary and Finance Committees, as well as on the Senate floor, the Senate passed Senate Concurrent Resolution (SCR) 13 yesterday on a voice vote. The measure now moves to the House.

If passed, West Virginia would join 26 other states to call for a constitutional convention to propose a balanced budget amendment to the U.S. Constitution. Thirty-four states need to pass such resolutions in order for a convention to be called. Then 38 states would need to ratify the Balanced Budget amendment were it to be passed.

As we stated last week, this unprecedented action would be dangerous to our democracy as there is little understanding as to how such a process would take place and kept under control, protecting the U.S. Constitution from other amendments.

In addition, while everyone would like to see the nation on more secure financial footing, its budget cannot be run like a household budget. And forcing a balanced budget would be akin to “sequestration on steroids” as one senator put it this week.

Here’s more from this week’s Charleston Gazette, Charleston Daily Mail, West Virginia Public Broadcasting and Beckley Register-Herald.

capitol dome

Attention Moves to State Budget

With the conclusion of the 2015 Legislative Session, the Senate and House will turn their attention to the most important piece of legislation they will consider, the state budget.

In order to balance his budget, Governor Tomblin needs four bills to be passed. So far just two have made it through the legislative process. For more on the details, here is Sean’s blog post.

The governor again made tweaks to his proposed 2016 budget this week via a letter to legislators. His adjustments mean borrowing less than proposed from the state’s Rainy Day Fund. Here’s more.

Last month, WVCBP released its annual Budget Brief which looks at the governor’s proposed budget for the upcoming fiscal year. For an up-close look at what a proposed workers’ comp tax cut for the coal industry would mean to the state budget, both in the short and long term, check out Sean’s blog post

shale symposium

Join Livestream of Shale Symposium ~ March 19

Natural resource extraction isn’t new-it’s been an economic activity in this country for over a century-but what is new is the pace of development associated with that industry. Technological advances have opened up swaths of previously unrecoverable deposits of oil and natural gas. To maintain production levels, new wells are constantly drilled, which can overwhelm the infrastructure and planning capabilities of many small communities where this is occurring. To compound things, the finite amount of these resources means that at some point the resource will be exhausted and the industry will leave the area. When that will occur is anyone’s guess as projections and estimates vary wildly.

So what’s a community to do? How can it cope with the rapid development? How can the wealth be leveraged for future economic benefits to the community when the industry leaves? This one-day event hopes to provide some answers and strategies. It will give policymakers who are interested in the long-range success of their community a chance to interact with academics who have extensive knowledge of the industry’s impacts and to connect with colleagues facing similar issues.

The agenda features national and regional experts on three panels who will examine the issue across the timeline of natural resource development:
* Early shale development
* Growth-to-boom phase
* Declining development to bust phase – WVCBP’s Ted Boettner will participate in this panel discussion.

To listen in to the conversation, please join the livestream by registering here.

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Checking In on the Governor’s Bills to Balance the Budget

As Ted and I noted in our FY 2016 budget report, the governor’s proposed budget would not be balanced if passed as is. In addition to requiring a transfer from the Rainy Day Fund, a number of statutory changes are also needed. The governor proposed redirecting revenue that would have typically been directed out of the General Revenue Fund by statute, and instead keeps the revenue in the General Revenue Fund to help balance the budget. Altogether, these redirected revenues would free up $24.4 million. The governor introduced four bills to accomplish the changes, and with less than one week to go in the session, let’s check on their status. 

SB 266 would eliminate a sales tax exemption for certain purchases on highway projects for FY 2015. The exemption functions as a refundable credit, in effect transferring sales tax revenue from the General Revenue Fund into the State Road Fund. The suspension of the transfer would increase the General Revenue Fund by $11.5 million in FY 2016. SB 266 made it to 2nd reading before it was removed from the calendar by the Rules Committee on February 18th. 

HB 2226 redirects Corporate Net Income Tax revenue from the Special Railroad Intermodal Enhancement Fund back into General Revenue. Legislation in 2013 stopped the transfer to the Railroad Fund in 2014, and HB 2226 would permanently end the transfer, keeping $4.3 million in the General Revenue Fund. HB 2226 passed the House on on March 4th and is currently in the Senate Finance Committee.

HB 2462 reduces the amount of Sales Tax Revenue that is dedicated to the School Building Authority, redirecting the revenue back into the General Revenue Fund. Currently, $5 million in sales tax revenue is dedicated to the School Major Improvement Fund, and $17 million is dedicated to the School Construction Fund. HB 2462 would reduce those amounts to $2 million and $6 million respectively, keeping $8 million in the General Revenue Fund. HB 2462 has passed both chambers and is awaiting the governor’s signature.

HB 2212 reduced the amount of Severance Tax revenue that is dedicated to the West Virginia Infrastructure General Obligation Debt Service Fund. Currently, the first $23 million of severance tax revenue collected is dedicated to the Debt Fund, and HB 2212 would reduce that amount to $22.5 million, keeping $500,000 in the General Revenue Fund. HB 2212 has passed both chambers and was signed by the governor on March 3.

So far, only two of the four bills requested by the governor making statutory changes to increase the amount of revenue in the General Revenue Fund have completed the legislative process. Without all four bills, the legislature will have to make further cuts or borrow more from the Rainy Day Fund in order to balance the budget.

Governor Tomblin Requests Budget Adjustments

As the 60-day legislative session draws to a close, the legislature turns its attention to the budget.

This week, Governor Tomblin sent a letter to the legislature, requesting a number of adjustments to his original budget proposal. Like the adjustments he requested during the crafting of his 2014 budget, these are driven by changes to the school aid formula calculation. As a result, the governor now proposes borrowing only $15.5 million from the Rainy Day Fund, down from $25 million.

The governor’s request increases the local share of the School Aid Formula by $12.5 million. The local share is determined by local property tax revenue, and if property taxes are higher than expected, the state can then save money through the formula. This, along with other changes to the formula, will net the 2016 state budget an additional $12.3 million.

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With $12.3 million freed up from the school aid formula, the governor recommends increasing the General Revenue appropriation for Medicaid by $9.1 million. Since he originally proposed borrowing $24.7 million from the Rainy Day for this purpose, the additional $9.1 million in General Revenue appropriations will reduce the amount needed from the Rainy Day Fund to $15.5 million.

The remainder of the savings from the school aid formula is spread throughout various agencies, dampening the impact of the vacancy sweep and allowing some agencies to keep some vacant positions open. Other adjustments reflect statutory changes that reorganize the budget, including moving the GO HELP program and the Children’s Health Insurance Agency to the Department of Health and Human Resources, while some agency reductions were made smaller in order to maintain federal funding.

Senate and House leadership will likely take up the governor’s proposed 2016 budget bill, along with today’s changes, at the conclusion of the regular 2015 Legislative Session.

Workers’ Comp Tax Cut For Coal Will Hurt the Budget

A number of proposals have been made this legislative session with the perceived aim to help revitalize West Virginia’s coal industry. Two such proposals have been to eliminate or scale back the additional severance tax on coal that is dedicated to paying down the state’s workers’ compensation system debt. But, despite assurances the tax cut wouldn’t hurt the state’s budget, delaying the retirement of the workers’ comp debt will have an impact on future budgets.

Before 2006, West Virginia operated a state-managed workers’ compensation system, and the state Workers’ Compensation Commission was the sole provider of workers’ compensation insurance in West Virginia. The system was privatized in 2006, but the state retained all liabilities incurred before July 1, 2005. Those liabilities were transferred into the Worker’s Compensation Old Fund. At the time the Old Fund’s deficit totaled $2.4 billion, with the coal industry estimated to be responsible for about half of the deficit.

A number of revenue sources are dedicated to paying down the Workers’ Compensation Old Fund debt including the additional severance tax on coal, natural gas, and timber. Altogether, these revenue sources total approximately $254 million/year, with the severance tax bringing in the largest share.

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With the severance tax as the largest contributor, over half of the severance tax revenue comes from the additional severance tax on coal. In FY 2014, the Workers’ Compensation Debt Fund severance tax on coal brought in $63.7 million, while the tax on natural gas brought in $42.7 million. The tax on timber generated $2.9 million, while taxes on other minerals yielded about $52,000.

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Severance taxes have historically been the biggest contributor to the Old Fund deficit reduction, with nearly $1 billion in severance revenue contributed since FY 2006.

Old Fund Deficit Reduction Revenue Sources (FY 2006-2015)

1

With the contribution from the severance tax leading the way, the state has made a great deal of progress in reducing the Old Fund’s debt. The debt was reduced by nearly 85%, falling from $2.4 billion at the end of FY 2005 to $350 million at the end of FY 2014. From 2005 to 2014, the debt balance was reduced by $2.06 billion.

Old Fund Debt Balance (end of fiscal year)

2

While the tax break is being sold as a way to help out the coal industry, the coal industry is getting a good deal on the tax. As mentioned above, it is estimated that the coal industry was responsible for about half of the Workers’ Comp Debt that the state assumed. But the severance tax on coal has accounted for less than 1/3 of the payments made to reduce that debt. Between 2006 and 2014, the workers’ comp coal severance tax totaled $713 million, roughly 32% of the total payments of $2.2 billion. In fact, in no year between the start of the payments in FY 2006 and FY 2014 was coal’s share of the payments higher than 42%.  If the coal industry had made 50% of the payments to reflect its share of the deficit, the industry’s total payments would have been $1.1 billion, more than $387 million more than it actually paid. 

According to the analysis in the FY 2016 budget proposal, the workers’ compensation debt is projected to be paid off by the end of calendar year 2016, or halfway through FY 2017. Once that happens, the additional severance tax on coal and gas will be removed, while $35 million of the personal income tax dedicated to the debt reduction will be dedicated to Other Post Employment Benefit programs. The other $60.4 million will be deposited into the general revenue fund, helping close projected future budget gaps.

At $254.4 million/year, the state makes an average monthly payment of $21.2 million to pay down the worker’s comp debt. With an estimated payoff date of December 2016, the state will pay a total of $381.6 million to fully retire the debt, starting July 2015.

The two proposals would prolong the amount of time needed to pay off the debt by reducing the amount of severance tax tax revenue dedicated to the paying down the debt. HB 2675 reduces the tax rate on coal, natural gas, and timber. According to the fiscal note, the rate reductions will lower revenue by $10.8 million. This would reduce the total amount of annual revenue dedicated to paying down the debt to $243,6 million, and the average monthly rate to $20.3 million. 

At an average monthly rate of $20.3 million, it would take an extra month to reach the $381.6 million currently projected as needed to fully retire the debt. That extra month of payments would then delay the return of the personal income tax revenue to the general revenue fund, costing the general revenue fund $5 million, and increasing FY 2017 budget gap.

HB 2394 aims to fully repeal the additional tax on coal. According to its fiscal note, it would lower revenue by $52.6 million in FY 2016 and $57.4 million in FY 2017. This would reduce the average monthly payment to $16.8 million in FY16 and $16.4 million in FY17. At those rates it would take an additional five months to reach a total of $381.6 million. Delaying the return of the personal income tax to the general revenue fund by five months would cost the fund $25.2 million, again increasing the FY 2017 budget gap. This could also significantly shift the tax responsibilities from the coal industry to state residents as the personal income tax dedication would have to stay intact longer.

There are two important factors to mention when looking at these estimates. First, neither estimate includes the additional interest that would accrue by delaying payments, which would make the costs even higher. Second, a study from WVU’s BBER found these type of tax gimmicks will do little to help a coal industry that is hamstrung by low productivity, high costs, and logistical barriers. In fact, as the authors of the WVU study pointed out, dropping the severance tax altogether would likely have a limited effect on increasing in-state producers’ competitiveness. But the budget pain that these cuts can create is all too real.

Budget Beat – March 6, 2015

Make or Break Time With Just a Week to Go

The 2015 Legislation Session is in the home stretch with time running out to pass legislation.

We are happy to report that the bill to drug test recipients of TANF benefits is dead. This expensive and inefficient program would have been an unnecessary expense for the state’s taxpayers.

A bill that would have removed licensing requirements for DHHR social workers has been improved. The National Association of Social Workers-WV was successful in working out a compromise which keeps DHHR social workers under the jurisdiction of the WV Board of Social Work. This means these important jobs that help some of the state’s most vulnerable families will still have strong professional requirements to help keep staff trained and prepared. For more, read Ted’s blog post and this Charleston Daily Mail article.

Several dangerous resolutions are still alive at the legislature which would give West Virginia’s support of states holding a constitutional convention to amend the U.S. Constitution. For a great recap of how risky this is for our democracy, read Betty’s op-ed  in today’s Charleston Gazette.

A new group, West Virginia Coalition for Retirement Options, is asking legislators to study ways to help West Virginians save more for retirement. Last year, legislation to create Voluntary Employee Retirement Accounts (VERA) began working its way through the legislative process and will hopefully be considered as part of the study resolution. Here’s more in this week’s Charleston Daily Mail.

We Need More Prosperity, Less Austerity

Last week, WVCBP released its annual Budget Brief which looks at the governor’s proposed budget for the upcoming fiscal year.

One way to help the state’s taxpayers and grow the state budget is to modernize Personal Income Tax rates. Because West Virginia’s rates and brackets have not changed since 1987, more middle-income households have been pushed into higher tax rates. For example, in 1987, West Virginia’s top bracket affected just three percent of households compared to 22 percent that were affected in 2014.

It’s time to adjust these brackets for inflation. The top bracket of $60,000, put in place 1987, is equivalent to over $128,000 today.

Increasing the tax rate to seven percent on those with adjusted gross incomes between $115,000 and $150,000, 8.5 percent on incomes between $150,000 and $250,000, and 8.9 percent on incomes over $250,000 could increase revenues by an estimated $100 million. This could be coupled with rate reduction for middle-class households.

For more wonk talk, listen to Ted on WV Public Broadcasting early this week.

Another tax reform that would help low-income families in a different way is described in Ted’s blog post. Providing a tax credit for small donations to candidates would give low- and middle-income people and incentive to participate in the electoral process, enriching our democracy.

Higher Education Cuts Hurt West Virginia’s Economic Future

A well-trained workforce is crucial to West Virginia’s economic future. This goal has not been a priority in the state, however, with year after year of cuts to higher education.

It’s past time for West Virginia’s policymakers to reprioritize the state’s budget and stop shifting the costs of tax cuts to college students and working families.

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A State Tax Credit for Democracy: Citizens Unite!

This evening the State Senate passed a bill that would make significant changes to our state’s campaign election laws by increasing the amount of money people can contribute to political campaigns. Under Senate Bill 541, the cap for campaign individual contributions would increase from $1,000 to $2,700 per election cycle, matching the amount that federal candidates receive in elections. The bill would also require organizations that give over $1,000 in campaign disbursements to be included in an online searchable database run by the Secretary of State’s Office.

While increasing transparency in the campaign election process is a positive step forward to combating the Citizens United decision that has opened up the floodgates for large, wealthy campaign donations, policymakers could also consider other avenues for combating the stranglehold of money on our democracy. One such idea would be to make it easier for everyday people to contribute to campaigns by giving them a state tax credit. This is exactly what Oregon does (and several other states to a lesser extent).

The Oregon Political Tax Credit, enacted in 1969, gives tax filers a non-refundable credit of up to $100 ($50 per person) who donate to a political party, candidate for office, or political action committee at all levels of government. Beginning in 2014, the tax credit is limited to single adults with incomes under $100,000 and joint filers with income under $200,000. According to the Oregon Department of Revenue, approximately 98,000 people claimed the credit in 2010 for a price tag of about $6.3 million, with the average credit being $66 per tax filer.  The share of Oregon taxpayers using the credit has ranged from 3.4 percent to 7.8 percent. 

The goal of the Oregon Political Tax Credit is to increase participation and clout in elections among everyday voters. In 2004, the US Public Interest Research Group (PIRG) put forth a similar proposal for federal tax credit based on Oregon’s Political Tax Credit. In its report, PIRG highlighted that a federal tax credit existed from 1971 to 1986 and received strong bi-partisan support. There has also been a renewed push at the federal level to pass similar legislation to create a $25 refundable My Voice tax credit to help spur small-dollar contributions to candidates for Congressional office. (A recent report by the progressive think tank DEMOS outlines several other proposals, along with the My Voice tax credit, that provide other incentives to bring more small donors into the political process.)

For relatively little money, West Virginia could design a similar My Voice tax credit (perhaps calling it the Citizens United Tax Credit). According to the IRS, in 2012 there were 788,490 tax filers in West Virginia. If we use this number as our base for 2016 and assume that five percent of tax filers use the credit – which would be on the very high end since the credit would be brand new – approximately 39,000 tax filers would use it. At an average credit of $66, this would amount to only about $2.5 million, even less if West Virginia adopted similar income caps as Oregon. West Virginia could also make the tax credit refundable, so more low-income people could participate. To pay for the tax credit, West Virginia could repeal a number of existing ineffective tax credits or just make it a priority by including in the state budget.

While adopting such a credit would not solve all of the problems associated with wealthy donors monopolizing the political process and public policy, it could be a great tool for grassroots campaigns that want to include more people into the political process in the post-Citizens United world. Citizens Unite!