West Virginia State Budget Must Reflect Our Priorities
State Journal - In 1970, former West Virginia Speaker of the House Ivor F. Boiarsky paraphrased coach Vince Lomabardi, saying that the “state budget isn't everything, but sometimes it comes close to being the only thing.” Read
This is because it is the one law that makes our state government function. It contains thousands of decisions that affect the lives of every one of the 1.8 million people living in West Virginia. As such, it is arguably the most important bill passed each year by the Legislature.
The budget reveals our state's values and our vision for the future by defining the important public structures, services and programs that create our quality of life. The budget also reflects how the funding for these priorities will be shared among all West Virginians.
Unfortunately, over the last several years, the state has chosen austerity over prosperity. Since 2006, the state has baked into the budget more than $400 million in annual tax reductions, with over half going to mostly large, out-of-state corporations and shareholders. The predictable result has been drastic cuts to our colleges and universities, a crumbling transportation system, no discernable impact on growth and jobs and squandered opportunities to ensure that more families have an opportunity to thrive.
To build a brighter future, West Virginia is going to need the resources that will improve the long-term fiscal health of the state while making the crucial investments that lay a foundation for economic growth and good-paying jobs.
For the FY 2015-2016 budget, Gov. Earl Ray Tomblin is projecting a significant shortfall of between $250 million to $280 million — which is about 5.7 percent of the $4.7 billion base budget than includes general revenue and lottery funds. This comes on top of a $75 million budget shortfall last year.
Here are some recommendations for how we can fix the state's long-term structural revenue problem, make our budget more accountable and transparent, while at the same time building a workforce that is more educated, productive and healthier:
- Increase tobacco taxes: Increasing the cigarette tax from 55 cents to $1 and the tax on tobacco products like snuff would provide an estimated $135 million in annual revenue while reducing health care costs, teen smoking and premature deaths. This could be paired with a refundable state Earned Income Tax Credit (EITC) to offset its regressivity. A state EITC also would incentivize more people to join the workforce.
- Tax exported shale gas at a higher rate: One of the central reasons West Virginia is poor has been our inability to adequately benefit from our rich, depleting natural resources. While West Virginia was unable to prosper from the coal boom of the last 100 years, it has a chance to get it right with the boom in shale development. The state could increase the severance tax from 5 to 10 percent on shale gas and natural gas liquids and offer a credit if it is used in-state. A portion of this revenue could go into the WV Future Fund. In 2012, Sen. Orphy Klempa, D-Ohio, introduced a similar bill (SB39) and there's been bipartisan support to provide a severance tax credit on coal used in West Virginia.
- Modernize the sales and personal income tax: There are many professional services (e.g. haircuts, private health clubs, etc.) that are exempt from the sales tax for no apparent reason. Altogether, the state loses $25.5 million each year by not expanding the sales tax to other personal services. Also, the state's personal income tax rates have remained the same since 1987. Creating new tax brackets for those with incomes above $250,000 would bring in millions in new revenue, curb income inequality and improve the state's upside down tax system.
- Scrutinize off-budget tax expenditures: This year the state spent at least $422 million through the tax code. About half, $217 million, was aimed at economic development. For the most part, we have little to no evidence if these tax subsidies are working or who is getting them. All of this indirect spending — including local property tax abatements — should be examined and published online.
- Set up a legislative fiscal office: West Virginia is one of the few states that does not have an independent agency like the Congressional Budget Office at the federal level. The office could increase budget transparency, produce unbiased fiscal notes on proposed legislation, make revenue estimates and provide solid analysis of legislative proposals and government programs and services. For example, if an agency properly reviewed the alternative-fuel tax credit in 2011, it could have saved our state over $100 million.
Shared prosperity doesn't happen by accident. It happens when we invest in human and physical capital — like roads, education, early childhood programs, health care and workforce development. It happens when more people have a chance to reach their full potential. As William Jennings Bryan said, “Destiny is not a matter of chance; it is a matter of choice. It is not a thing to be waited for; it is a thing to be achieved.”