Pages tagged "Tax and Budget"
The tax framework released last week by President Trump and Republican congressional leaders would result in huge tax cuts for the wealthiest households, while offering little to middle- and lower-income families. In West Virginia, the richest one percent of residents would receive 39.1 percent of the tax cuts within the state under the framework in 2018, according to the Institute on Taxation and Economic Policy. These households, with incomes of at least $358,800, would receive an average tax cut of $27,800 in 2018.
The tax framework largely benefits the wealthy because the plan:
- creates a lower rate for “pass through income,” creating a tax loophole that mostly benefits millionaires;
- cuts the top income tax rate for the wealthiest taxpayers;
- eliminates the estate tax, which only affects the wealthiest 0.2 percent of estates, or couples with estates of $10 million or more;
- cuts the corporate tax rate, which largely benefits corporate shareholders and senior executives;
- eliminates the Alternative Minimum Tax, which was designed to ensure high-income earners pay a minimum level of taxes.
The tax plan would particularly benefit those with incomes greater than $1 million. These households make up just 0.1 percent of West Virginia’s population but would receive 22 percent of the tax cuts if the plan was in effect next year. Those with incomes over a million dollars would receive an average tax cut of $178,900 in 2018 alone.
In contrast, the middle class would not see much benefit from the tax plan. The middle fifth of households in West Virginia, people who are literally the state’s “middle-class,” would receive just 7.3 percent of the tax cuts that go to West Virginia under the framework. In 2018 this group is projected to earn between $33,500 and $52,700. The framework would cut their taxes by an average of just $260.
If the framework was in effect in 2018, 8.4 percent of of West Virginia households would actually see a tax increase. While the tax framework increases the standard deduction, it repeals the personal exemption and most itemized deductions. This means that families who itemize their deductions instead of claiming the standard deduction may end up paying more in taxes under the plan.
Unlike the clear and concrete proposals that benefit the wealthiest taxpayers, the GOP-Trump tax framework is much more vague about the changes that would affect low- and middle-income people. The provisions that may benefit the middle class, such as the increased standard deduction and changes to the Child Tax Credit, are offset by other provisions, like raising the bottom income tax rate from 10 percent to 12 percent and repealing personal exemptions. The plan also leaves out key details of the Child Tax Credit changes. Additionally, the plan does nothing to to expand the Earned Income Tax Credit (EITC), which is arguably the most important provision in the tax code for working families.
The plan says “the committees will work on additional measures to meaningfully reduce the tax burden on the middle-class,” but it is clear from details of this framework, and previous GOP plans, that the main goal is large tax cuts for the wealthy, with low- and middle-income families as just an afterthought.
What many of these lawmakers neglected to mention is that our state budget has already been drastically reduced over the last several years and that our tax levels are at an all-time low. Even with our state's declining population, our per capita spending has declined over the last several years, after adjusting for inflation. While the number of state employees has grown over the last decade, almost all of the growth has been in higher education, which is mostly funded with tuition and fees that aren't appropriated by lawmakers. State employees funded by the General Revenue Fund, the part of the budget that contains most of the state taxes that support our biggest programs, is at a 10-year low.
State Budget Spending Down, Not Up
Before I show how state spending has changed over the past decade, it first important to understand the different spending accounts or "funds." There are six main accounts and each of them derive their revenue from different places, including the General Revenue Fund (mostly taxes), Special Revenue (mostly dedicated fees and some taxes), Lottery Funds (games), State Road Funds (gasoline tax/DMV fees/federal taxes), Federal Funds (income/payroll taxes), and Non-Appropriated Special Revenue Funds (dedicated fees).
While each is important (See Your Guide to the State Budget for more details), the General Revenue Fund (GRF) pays for most of the state's key budgetary items (e.g. Public Education, Higher Education, Corrections, etc.) and is the source of most of the taxes we pay to maintain government services. The GRF is also the part of the budget legislators have the most control over and it is where most of the budget debate takes place each year.
As the chart below shows, General Revenue Fund appropriations for 2018 are slightly below actual spending in 2013. If you adjust for inflation, the state plans to spend about $350 million less in 2018 than it did in 2013 and $268 million less than it did ten years ago in 2008. (The central reason GRF spending declined in 2010 and 2011 was because of hundreds of millions of additional federal dollars from the stimulus (ARRA) that were used to back-fill spending for higher education, public education, and Medicaid.)
If you look at GRF spending over the last six years with and without Medicaid, it is clear that Medicaid is one of the only growing parts of the state budget and that is largely responsible for any increases in spending since 2012. The growth in Medicaid spending is mostly due to rising health care costs and the depletion of the Medicaid Trust Fund that was built up from a higher federal match rate (FMAP) from the stimulus.
Some policymakers have been quick to point out that West Virginia should be spending less because of its declining population. At quick look at per capita General Revenue Fund spending in West Virginia reveals the state spent less per person in 2016 compared to the past.
Altogether, the West Virginia State Budget Office estimates that West Virginia has cut its budget by more than $600 million over the last five years. In the final analysis, it is pretty clear that West Virginia's budget has been reduced over the last several years both in nominal and real (inflation-adjusted) terms.
State Employment Growth is Due to Rising Tuition, Not Increased Budget Spending
While some policymakers have suggested that our state government is too big because the number of people working for state government has grown, this is only true if you are looking at the growth in employment at our public colleges and universities that is funded primarily through tuition and fees, which have grown partly due to budget cuts.
As the graph below highlights, total Full-Time Equivalent (FTEs) positions in state government have grown by 3,685 over the last 10 years, from 38,917 in FY 2008 to 42,145 in FY 2017. However, if you break down the number of FTEs by each spending account or revenue fund it is clear that almost all of the growth is in positions funded by Non-Appropriated Special Revenue that have increased from 8,332 to 11,470 from 2008 to 2017, an increase of 3,138. Meanwhile, state government positions funded by the GRF have declined over this period by 427 FTEs, from 17,335 in 2008 to 16,908 in 2017.
Federally funded state government position have grown by 111 FTEs from 2008 to 2017, while State Road Fund positions - which receive more than one-third of their revenues from federal funds - has grown by 908 over this period. If you just look at funds that comprise only state-source funding, the General Revenue, Lottery, and Special Revenue funds, the number of state government FTEs has declined by 544 since 2008.
So, what is causing the increase in state government positions in Non-Appropriated Special Revenue Funds? If you look at the data from executive budget reports, it is being driven almost entirely from Non-Appropriated Special Revenue growth in our two and four-year public colleges which is mostly made up of tuition and fees charged to students. From FY 2008 to FY 2016, Non-Appropriated Special Revenues at West Virginia's two and four-year colleges have grown by over $450 million while General Revenue Funds have grown by less than $1 million over this period. The decline in state GRF support for higher education has partly led to an increased reliance on tuition/fees to fund the colleges and the people that work there.
As the chart below shows, in 2008, there were 5,345 permanent positions at West Virginia's public colleges funded by General Revenue expenditures compared to just 4,155 in 2017. Conversely, the number of positions at colleges funded by mostly tuition and fees rose from 5,765 to 8,690, an increase of nearly 2,925. So, while the number of people employed by our public colleges has grown, this isn't due to more state spending at our public colleges; it due to the increase in tuition and fees that are paid by in-state and out-of-state students.
Taxes Are a Smaller Share of our Income
As discussed above, the General Revenue Fund contains most of the taxes that are collected by the state. Over the last decade, General Revenue collections in West Virginia as a share of the state economy have shrunk from a high of 7.4 percent in 2005 to just 6 percent in 2016. The drop in state revenues as a share of the economy is mostly due to large tax reductions that were phased in beginning in 2006, including the elimination of the business franchise and grocery tax and the reduction in the corporate net income tax from 9 to 6.5 percent. Before the tax cuts were enacted, General Revenue Fund collections made up on average about 7 percent of our state's economy between 1990 and 2005. At 7 percent, West Virginia would have collected over $650 million more in General Revenue Funds in 2016 than it did.
Moving forward, the state is going to need additional revenues to keep up with the cost of government services, which tend to grow faster than our overall economy (and for good reason). This is especially true for Medicaid and other state health care services. The state will also have to reorganize itself in some manner to deal with population shrinkage - especially in the south - and will need to take steps to lower health care costs, make college more affordable, and ensure that our classrooms are filled with better paid teachers. The one thing we should not be doing is priding ourselves on gutting state government when it will be needed now more than ever if the state is ever going to rebound in the future.
Given the choice between baking in large-scale future budget cuts with big tax cuts and passing a budget with sizable cuts for one year, it seems like the legislature made the better of two bad choices in refusing to go along with Senate Republicans and the governor.
As Governor Justice pointed out during his budget announcement, there were several tax plans that he and the Senate proposed that failed to pass in the House. While the governor called them "missed opportunities" it is more apt to look back upon each of the tax plans as missed fiscal calamities for the state that would have resulted in deeper budget cuts in the future.
While Governor Justice put together several tax plans during the regular legislative session that raised enough revenue to close the budget gap - which moved from -$497 million to -$270 million based on agreed to budget reductions - his joint proposal with Senate Republicans during the last night of the 60-day regular session would have led to larger budget cuts in FY 2018 and beyond. Therefore, it is difficult to understand how Governor Justice can see this as a "missed opportunity" if he is concerned about budget cuts hurting the state.
Strangely, Governor Justice told the media that "all this does is kick the can down the road, and there's massive budget holes in the out years." The governor went on to say that the budget gap for FY 2019 is "$179 million" and "$486 million" by FY 2022. A simple look at the revenue impact of each of the "missed opportunities" or tax proposals shows that these gaps would have likely been much larger in outer years if most of these tax proposals would have been adopted.
Below is table that includes the net revenue impact of each of the proposed tax plans from the governor, House, Senate and several that the governor endorsed along with Senate leadership. Outside of the governor's first tax plan that was included as part of this original budget for FY 2018 and his second proposed tax plan based on agreed to budget cuts (these were not mentioned as "missed opportunities" by the Governor), all of the other tax plans proposed by the Governor (along with the Senate) failed to raise enough money to close the projected budget gap for FY 2018 let alone for future budget years.
In fact, the tax plan the governor put together with Senate Republicans on the last night of the session on April 8th - missed opportunity #1 according to the governor - would have drastically reduced revenues for the state and expenditures absent future tax increases. By FY 2021, the State Tax Department estimated that it would have reduced General Revenue Fund collections by -$220 million and much more going forward, as the income tax was phased down. The House did not fare much better. Two out of three of the tax plans that passed the House lowered net revenue collections by FY 2020, which would require tax increases or more future budget cuts. While the tax plan passed by the Senate last Thursday increased net revenue by $93 million in FY 2018 - presumably close to enough revenue to pass the governor's FY 2018 budget during the special session along with the new revenue estimates - the estimated revenue for FY 2019 was $30 million less, leading most likely to more budget cuts next year.
While Protect WV, WV Center on Budget Policy, and some lawmakers (see here and here) put forth a several revenue proposals for avoiding the deep cuts included in the FY 2018 budget, the legislature unfortunately could not agree on any revenue enhancements. Despite this inaction, the state's fiscal health and funding of future budget priorities would have been much worse had most of the "missed opportunities" become law. On top of the tax proposals not bringing in enough money to fund budget priorities, most of the compromise tax plans between the Governor and Senate (see here, here, here, and here) lowered taxes on the wealthy while increasing them on most West Virginians.
If there is silver lining to the state's budget crisis this year it is that the budget passed by the legislature last week contains about $122 million more in General Revenue Fund appropriations than the budget vetoed by the governor in April. While it remains to be seen whether the new revenue estimates for next year pan out, they at least helped avoid more severe budget cuts.
Moving forward, the state is in for more hard times as the state faces yet again another large budget gap next year and likely stalemate on the need to pass sufficient revenues to meet the states needs. That said, it would have been a lot worse had the legislature acted on many of the governor's tax proposals.
You're welcome, America. Our state, Kansas, just wrapped up a 5-year long experiment in governance from which the other 49 states can now glean some important lessons. The Kansas Legislature has voted to roll back much of the 2012 package of tax cuts that sent the state into a downward spiral of financial instability and weakened the Kansas' public schools, universities, Medicaid program, and virtually everything else that the state funds.
With the state facing yet another budget shortfall of $900 million, government leaders decided that enough was enough. Governor Brownback, who heralded the 2012 experiment, was proposing yet more temporary band-aid approaches and more cuts deal with the shortfalls. The Legislature chose a different path and instead sent the Governor a bill that would raise more than $1.2 billion in new revenue over two years by, among other things, repealing a costly tax break for pass-through income, rebalancing individual income tax rates by reinstating a third tax bracket, and reversing course on the Governor's plan to eliminate our state income tax. Brownback vetoed the legislation but, with bipartisan support, the House and Senate quickly overrode the veto.
Our state has begun the path to fiscal stability and is closer to becoming a model of good policy choices as much as it is a cautionary tale. The damage done to Kansas from this reckless experiment will not be undone overnight, but other states need not wait to act upon the lessons learned.
Put simply, revenue matters. You can't get something for nothing. We all want and deserve thriving communities with great schools, parks, and modern roads and bridges; and we chip in to pay for that. That's what taxes are for.
Because of the scope of the 2012 changes, it didn't take long before Kansans in every corner of the state began connecting the dots between the actions of state lawmakers and the quickly eroding quality of the things that make for a good economic foundation in every community. With every subsequent shortfall, the picture became more clear. Meanwhile, the promised economic boom—and the revenue rebound that would supposedly follow—never happened (as economists predicted). In the last few election cycles, voters have viewed candidates and their promises through a different lens, and the 2017 Legislature had the experience and public backing to chart a new course.
Most state tax codes, including ours, need further reform, but it's high time that state tax policy adhere to one basic, proven (and now proven once again) principle – states need revenue to invest in the things that create thriving communities and a prosperous economy. Kansas just learned this lesson again, the hard way, so that your state doesn't have to. You're welcome.
As Phil Kabler notes in the Gazette-Mail, it is also unclear what is currently included in the so-called compromise tax plan being advanced by Governor Justice. It has been rumored the tax plan is the same as Senator Fern's amendment to SB 484 with the exception that the plan includes the Governor's tiered severance tax rate changes and not the ones in the Fern's amendment that significantly reduce severance tax collections. If this is true, the revenue impact to the budget would be significantly reduced. (For more detailed account of the Ferns Amendment aka the proposed compromise tax plan, see our previous post here)
According to estimates provided by State Tax Department (via email), the proposed severance tax changes in the Fern's Amendment would result in a loss of an estimated -$135 million in severance tax collections in FY 2018 and between -$140-$150 million thereafter. Overall, the net result of the Ferns Amendment on the General Revenue Fund, according to the State Tax Department, is an increase of +$50 million in revenues in FY 2018, and a net reduction of an estimated -$170 million in FY 2019 and FY 2020, and a reduction of -$220 million by FY 2021.
For FY 2018, this includes +$280 million in sales tax increases (7 percent rate and broader base), +$49 million in additional revenue from the new and temporary CAT or commercial activities tax (0.045 percent) and high-income tax surcharge, an increase of +$12 million from ending sales tax transfer to Road Fund from sales tax collected on highway construction, and approximately -$156 million less in personal income tax collections. (Note: The reduction in the personal income tax is -$380 million upon full impact. The income tax reductions do not begin until January 1, 2018, while the other tax changes take effect July 1, 2017 - the beginning of FY 2018 - but start June 1, 2017). It is also important to keep in mind the CAT and high-income tax surcharge expire on July 1, 2020 or the beginning of FY 2021).
If the severance tax changes in the Ferns Amendment are swapped for the Governor's proposed severance tax rates that are estimated to be close to revenue neutral, this means that the net revenue impact on the General Revenue Fund would be an increase of +$185 million ($50m + $135m) in FY 2018, then a decrease of -$30 million in FY 2019 and FY 2020, and then a reduction of -$70 million by FY 2021 assuming there is no phase-down of income tax rates.
While incorporating the Governor's severance tax proposals into the tax compromise plan provides a significant revenue boost during the FY 2018 budget year, the sharp reductions in the income tax when it is fully implemented leads to revenue losses beginning in FY 2019 that will grow the state's budget deficit and lead to additional cuts to vital programs and services. These declines will grow more over time, with the phase down of the income tax and the expiration of the CAT and high-income surcharge by July 1, 2020.
When all of the tax changes are fully implemented in their first year (not including sales tax transfer from Road Fund), it adds up to $280 million in additional sales tax increases, $49 million in increased revenues from the CAT and high-income surcharge, and $380 million in cuts to the personal income tax. This means the proposed compromise tax plan is actually reducing taxes on West Virginians upon full implementation, not increasing them when it comes to the General Revenue Fund budget.
While the compromise tax plans leads to one year of positive revenue growth for the General Revenue Fund and growing deficits thereafter, the proposed revenue changes to the State Road Fund would increase revenues by about +$130 million in FY 2018 and +$138 million thereafter (if you do not include the transfer of sales tax collections from the Road Fund to the General Revenue Fund).
Altogether, the revenue changes in the proposed tax compromise plan - including General Revenue and State Road Funds - increase state revenues by approximately $315 million in FY 2018 and $108 million in FY 2019. To be clear, these estimates are subject to change at any time since there is no agreed upon tax bill or a full disclosure of what is being proposed between the Governor and legislative leadership.
The overall impact of these tax and revenue changes on households in West Virginia is the same as as has been reported in previous post, which did not include any severance tax changes because the tax is mostly exported out of the state and unable to be modeled because of difficulties obtaining proper information for the process.
Upon full implementation - which does not include any phase down of the income tax rates or the expiration of the CAT or high-income surcharge - the proposed tax and revenue changes would, on average, increase taxes on 80 percent of West Virginia households making below $84,000 per year, while lowering them on the 20 percent of West Virginians that make more than $84,000 per year. Those making on average $11,000 per year would see their annual taxes rise by $121 or 1.1 percent of their income, while those making on average $778,000 (top 1 percent) per year would see an average tax cut of $3,713.
This means that the compromise tax plan - if this is in fact it - raises taxes on most West Virginians to help pay for tax reductions for higher-income West Virginians while leaving some revenue to spare in the first year.
The table below breaks out the tax changes for each income group in West Virginia. It includes the full-implementation of income tax reductions in 2018 and the high-income surcharge. While every income group sees an increase in their taxes from the proposed changes to the sales tax, motor fuel tax/DMV fees, and the new commercial activities tax, the large personal income tax reductions mostly goes to the top income groups. In fact, approximately 59 percent of the more than $364 million in income tax cuts go to the top 20 percent, according to the Institute on Taxation and Economic Policy. This is why higher income West Virginians are estimated to receive an overall reduction in taxes while low and middle-income West Virginians see an increase in taxes.
A closer look at the proposed changes to the income tax illuminate this point further. The proposed tax compromise plan condenses the state's five income tax brackets into three brackets and reduces the rates. For example, instead of a top marginal tax rate of 6.5 percent on income over $60,000, the tax compromise proposal replaces this rate with a top rate of 5.45 percent on income over $35,000. This change will benefit those who have more income.
As the chart below highlights, the personal income tax in West Virginia is based on the ability to pay. This is largely because personal income tax rates increase as income increases. Sales taxes on the other hand, are regressive, taking a larger share of income from low- and middle-income West Virginians. And because those at the bottom and middle spend more of their income on necessities than the wealthy, shifting from the income tax to a greater reliance on sales taxes is a shift in "who pays" from those with more income to those with less income. Phasing out West Virginia's income tax would also make the state's upside down state and local tax system even more regressive over time.
As discussed in a recent report, shifting from the income tax to the sales tax is a poor strategy for economic growth. Academic research and real-world evidence from other states show that there is little evidence that such a shift will significantly boost economic growth, attract more people, or grow small businesses. However, there is compelling evidence that the income tax is a more reliable source of income than the sales tax over the long-term and that the states with more regressive tax structures increase income inequality.
As the Governor and legislature work out a compromise on the budget, including tax changes, they should keep in mind that setting West Virginia on a path of further cuts and just one year of revenue gain is not going to help build a stronger West Virginia where communities can thrive. While it is great to invest additional resources in our state's crumbing roads and bridges, those gains could be washed away be shortchanging our state's other needs - including our public colleges, schools, public safety, and health-care services.
Just any tax plan is not a good tax plan. It must be grounded in realistic assumptions and be sustainable over time. A sound plan cannot rely on false claims about trickle-down economic growth or a sudden surge in coal mining or natural gas extraction. It must provide a reliable source of revenue that can pay our state's debts and sustain public investments.
As developments of the tax and budget compromise unfold, we will continue to analyze and review them as they are released to the public.
The table below provides an overview of the tax changes included in the compromise tax plan that were offered as an amendment to Senate Bill 484. While the plan raises revenues by increasing the sales tax and enacting a temporary tax on businesses (CAT) and high-income earners, the deep cuts to the personal income and the severance tax lead to a sharp decline in revenues for the upcoming fiscal year of 2018. The tax plan lowers revenue collections in future years even further since both the CAT and high-income tax expire by FY 2020, and the personal income tax is phased out over the coming decades.
The changes to the State Road Fund include an 8-cent increase in the motor fuel tax and increases in various DMV fees. This totals approximately $118 million in additional revenue for FY 2018 or about $60 million less than the Governor proposed in his FY 2018 budget.
On top of the $115 million in lost revenues that punch a bigger hole in the state budget, the proposed tax changes would on average increase taxes on 80 percent of West Virginia households making below $84,000, while lowering them on the 20 percent of West Virginians that make more than $84,000. Those making on average $11,000 would see their annual taxes rise by $121 or 1.1 percent of their income, while those making on average $778,000 (top 1 percent) would see an average tax cut of $3,713. This means that the compromise tax plan - excluding severance tax changes - raises taxes on most West Virginians to give large tax breaks to those that need them the least.
As noted in previous tax proposals, these changes will not only exacerbate income inequality and make it harder for low- and middle-income families to make ends meet, but they will lead to large future budget shortfalls that will damage our state's ability to invest in the building blocks of our state's economy.
Cutting income and severance taxes – while phasing out the income tax – is not going to pave a strong future for the state. Instead of moving in this direction, lawmakers need to work together to ensure tax reform is addressing the state's looming budget crisis together not making it worse.
This West Virginia Center on Budget and Policy Issue Brief, On the Brink: Closing West Virginia’s Budget Gap, released today, details the various budget proposals offered by Governor Jim Justice and the West Virginia Legislature to close the state’s nearly $500 million budget deficit. Read the full brief. The legislature passed a budget with major cuts to education and health care, no new revenue, and, again, dipped into the state’s Rainy Day Fund to balance the budget. With Governor Justice expected to veto the budget passed by the legislature, the state’s fiscal status remains unclear. Significant tax cuts implemented over the last decade, continued declines in coal production, falling natural gas prices, and a weak economy have all contributed to the state’s consecutive budget gaps in recent years.
- The governor’s plan for closing the estimated $497 million budget gap for FY 2018 includes $450 million in new revenue, largely from increased sales and business taxes.
- The governor’s revised budget proposal includes smaller increases in sales and business taxes, but also includes increased taxes on tobacco and sugary-sweetened beverages.
- The budget passed by the legislature levied large cuts to higher education and Medicaid, while taking $90 million from the Rainy Day Fund.
- The proposed FY 2018 base budget totals $4.89 billion. Increases over the FY 2017 budget include the proposed $105 million Save Our State fund, and increased base budget appropriations for Medicaid.
- Most areas of the budget are spending less in FY 2018 than in FY 2012.
- To prevent future budget problems and begin reinvesting in the state, lawmakers should look at policies that rebalance the tax system while providing sufficient revenue.
The House tax plan will drop the sales tax rate from 6.0 percent to 5.5 percent beginning next year on July 1, 2018, and then to 5.0 percent on July 1, 2019. Thereafter, the sales tax rate will continue to drop based on a revenue formula, but not drop below 4.75 percent.
Several services and goods that are currently exempt in the sales tax base would now become taxable. These include telecommunications, personal services (barbering, massaging, manicuring, hair setting, hair washing and dying, shoe-shining, and non-medical personal care services, contracting services (on first $40k), electronic data processing, and opinion research. The bill also lifts the direct use exemption for all sales, services machinery, supplies and materials directly used or consumed in transportation (except coal) and communications. Almost all states have broad direct use exemptions because of concerns about tax pyramiding and business-to-business taxation.
Though SB 484 faces an uncertain future, it is clear it is not enough revenue to stop large budget cuts in the House and Senate budget bills and it creates future budget gaps that could lead to even bigger budget cuts to important programs and services in the future. While SB 484 increases revenue by $138 million for FY 2018, revenue drops to $55 million in FY 2019, followed by a decrease of -$15 million by FY 2020. This creates a budget hole of $83 million in FY 2019 and $153 million by FY 2020 if the House passes it's budget bill than already cuts millions from important program and services.
The biggest single change from the governor's proposal is the elimination of funding for Governor Justice's Save Our State Fund, which saves the budget $105.5 million dollars.
Another major change from the governor's proposal can be found in the budget for the Department of Education. The Senate's budget cuts appropriations for the Department of Education by $141 million, with two major changes. First the school aid formula is adjusted to increase the local share of k-12 education, lessening the state's share by $98.7 million. The Senate bill also keeps the governor's proposal to "smooth" payments to the Teacher's Retirement Unfunded Liability, saving $44.7 million.
In addition, there appears to be cuts to Medicaid in the Senate budget. General revenue appropriations for Medicaid are cut by $64.7 million, but are partially offset by increases in Excess Lottery and Trust Fund appropriations. Cuts to other areas of DHHR total $28.9 million below the governor's proposal.
Finally, after years of cuts totaling $55 million, higher education goes under the knife again, with cuts totaling $41.6 million below the governor's proposal, including $10 million in cuts to community and technical colleges and $31 million in cuts to public 4-year colleges and universities. The $41.6 million in cuts to higher education come on top of Governor Justice's proposed cuts to higher ed, bringing the total cut from FY 2017 to FY 2018 to $51.6 million. Funding for Higher Education from the General Revenue Fund would be $115 million below FY 2013 levels for FY 2018 under the Senate's budget bill.
- Average tuition at West Virginia’s public colleges and universities has increased by $4,200 since 2002, a 147 percent increase, and far outpacing inflation.
- Tuition increases, in large part, have been fueled by falling public support for higher education. Since 2008, state spending in higher education has declined by $130 million, adjusting for inflation.
- As tuitions have increased, so has student debt. The average debt of a college graduate in West Virginia has increased by 70 percent since 2005. West Virginia also has the second highest student loan default rate in the country.
- Tuition increases have eroded the value of the state’s financial aid programs. The share of tuition covered by the PROMISE scholarship has fallen from 100 percent to 70 percent.
- Investments in higher education provide significant economic benefits. Improving the levels of educational attainment in West Virginia’s workforce will help ensure the state’s economic future.