Cuts alone not enough to balance budget

CHARLESTON — Balancing the budget on cuts alone will be difficult for West Virginia to do and still maintain adequate services and infrastructure.

During a panel on the state’s budget at Friday’s West Virginia Legislative Lookahead, Ted Boettner, executive director of the West Virginia Center for Budget and Policy, told journalists that investments are needed to turn the state around.

It is estimated that West Virginia will face a $500 million deficit this year and new governor Jim Justice has hinted at budget cut proposals that would slash $390 to $600 million.

Justice is slated to unveil his plan during his first State of the State address Wednesday.

Boettner painted a bleak picture if the legislature decides to slash services and infrastructure. He said the reason West Virginia is facing such a large deficit is because lawmakers previously approved a variety of tax cuts, including reducing taxes on national resources and businesses.

“Before tax cuts, we were running budget surpluses,” he said. “That’s how our rainy day fund got up to $1 billion. Understanding that, if we continue to go down the path of more austerity, I think it’s not hyperbole to say that parts of our state will just completely be uninhabitable in the future.

“Schools and libraries will have to close, roads and bridges will continue to deteriorate, towns will be abandoned, water systems will crumble, health clinics and social service agencies will close.”

Instead, Boettner pointed at ways to raise revenue, such as increasing the soda tax and tobacco tax.

“We are also one of the most obese states in the country, and the most unhealthy, so a tax offers an opportunity to not only bring in revenue but also to address that problem,” he said. “Smoking — we were one of the highest states in tax per person. You get the dual focus of the revenue plus you get to lower health care costs and save lives. Sounds like a pretty good deal to me.”

Boettner also noted that the state’s general revenue fund collections average 5.9 percent now compared to 6.8 percent from 1990 to 2007.

He also said he highly recommended raising the natural gas tax — especially on liquids that are not being used in West Virginia in the manufacturing process.

Other ideas he raised that have been talked about around the state include a cell phone tax, digital downloads tax and streamlining the sales tax.

“If we want West Virginia to be a thriving place where people want to live, work and raise their families, we will need a world-class education system, top-notch infrastructure, affordable and innovative public university and college system, and policies that boost workforce participation and improve our health, “Boettner said. “You cannot really make a dent in those huge problems by making the problem worse with huge budget cuts and more tax cuts. You can’t improve the health of somebody by reducing taxes. You can use a tax code to address that problem, but you also need to invest in things that are going to get more people into the work force like child care assistance and creating a state earned income tax credit. Those are the investments we need to make if we want to incentivize more people to get into the work force.”

Del. Eric Nelson, R-Kanawha, is the House finance committee chair and said West Virginia is one of only two states that currently taxes soda.

“We put a penny on that and $15 million comes in every year,” he said.

But talks to increase the tobacco tax get stymied by what is happening in other states.

“I can’t stress enough about the composition of our membership and how many of them are in border counties,” he said. “[We listen] to the arguments they bring back about what it’s like just across the border in Virginia, Ohio or Pennsylvania.

“Both of these are taxes that bring in revenue and possibly change the health component, which would be very positive. We all want to see change, but they also get, more often than not, the low socio-economic groups.”

Senate finance committee chair Sen. Mike Hall, R-Putnam, spoke of a streamlined sales tax initiative and feels that it should be passed on the federal level.

He also referenced the underground cash economy in West Virginia.

“I think there are a lot of people exchanging goods and services that aren’t paying any income tax at all,” he said. “The mood of many people in the legislature right now is looking more in the area of consumption taxes than income taxes.”

But Hall said he is not yet sold on the idea of expanding into all of those consumption tax areas because he feels there may be a diminishing returns in doing that.

The senate finance chair said he is open to more discussion.

And Nelson said when it comes to the budget, lots of cuts may not be able to happen without changes to the state code.

“Education takes up 50-some percent of general revenue budget and is in code,” he said as an example.

But Nelson said one idea being looked at is the privatization of certain services.

The state owns four nursing homes, he pointed out.

“Many questions must be asked,” he said. “Does the state need to be in a business that a private entity can provide?”

Another area to make cuts is the state’s vehicle fleet, but Nelson said he doesn’t see significant savings from that.

“There’s been a lot of noise on the fleet, but that is small potatoes on the whole scheme of things,” he said.

Hall said some people question the need to have 55 counties and have mentioned consolidation.

“I’m not sure that is an easy thing to do without doing a constitutional amendment,” he said. “The second thing is there is kind of an entanglement in combining counties. Many of them have bond levies, and when you try to put them together, it’s ‘who is going to pay what?’”

So Hall said he can understand that line of thinking of being too top heavy but doesn’t think there is great savings from combining counties.

Another idea has been to reconsider the role of the state’s eight RESAs.

“RESAs are $3.8 million in general revenue budget and they raise and spend $54 million,” Hall said.

One RESA in the Eastern Panhandle also does the West Virginia Birth to Three Program.

Hall said he would hate to lose the $54 million RESAs raise from grants and foundations.

“I’m not sure there is multimillion of savings there although the whole educational delivery system is obviously going to be looked at,” he said. “I do not see easily cutting deeply.”

Hall said that higher education is bracing for less money.

“Higher ed is looking at larger numbers of loss than public ed,” he said. “Although we will just wait and see what the governor is proposing.”

Boettner said that realizing long-term savings is not something that can easily be accomplished in a 60-day legislative session.

“What do we have? A week until session starts, and April is supposedly when the budget will be passed,” he said. “I can’t highlight that enough. These decisions have to be made now and getting those long-term savings benefits of consolidations and privatizations will be very difficult to get into a couple months. Restructuring our university system is something we want to do very carefully.”

West Virginia has the smallest share of people with a post secondary degree, according to Boettner.

“If we continue to keep cutting higher education and creating a high sticker shock for kids, it’s going to make it harder and harder, especially for low-income and working class families, to get a higher education degree,” he said. “We are already seeing that. The college going rate is going down and tuition has gone up.”

West Virginia previously did a good job with its PROMISE scholarship initiative but Boettner added that PROMISE used to cover all of tuition and now pays for just a portion.

More In Local News