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Tax Bill Failures Leave State Budget in Doubt

Votes against several tax bills in the House are leaving West Virginia lawmakers with no clear path to a workable budget. (West Virginia State Legislature).
Votes against several tax bills in the House are leaving West Virginia lawmakers with no clear path to a workable budget. (West Virginia State Legislature).
March 7, 2016

CHARLESTON, W. Va. - The House of Delegates has defeated several tax bills, leaving big holes in the state budget. The chair of Senate Finance says West Virginia needs to face basic problems with the way it raises revenue.

Senator Mike Hall says hundreds of millions in food and business franchise tax cuts were based on projections of "normal" severance taxes.

But coal and especially gas tax receipts have collapsed.

The Senate attempted to fill part of the gap by expanding the sales tax and raising tobacco taxes. The more anti-tax House voted those down. Hall says that leaves the rainy-day fund.

"I would anticipate then we'll have to go use some of the revenue shortfall reserve fund to backfill whatever gaps there are," says Hall. "It's like your personal savings account, you didn't want to go there, but you might have to."

Hall admits that's a temporary patch. Plus Gov. Earl Ray Tomblin has threatened to veto any plan that draws more from the rainy day fund. The budget faces an estimated $170 million shortfall for 2016-2017.

Along with a gap in the general revenue fund, the state faces dramatically higher needs in road repairs and public employees health insurance.

With Republicans now in control of the Legislature, many members have called for more spending cuts.

Hall, himself a Republican, points out the state has already gone through several rounds of across-the-board reductions in the last few years.

"There's been 20 percent budget cuts already," he says. "When you go further, you get into some pretty big things that people are used to having around."

Hall says the state's tax system no longer fits its economy. He says with changes in the energy markets, West Virginia can simply no longer depend on coal severance taxes the way it did.

"We in West Virginia will have to decide how to replace that revenue," says Hall. "To get to a sound, structurally sound budget."

The coal and gas industries are pressing for a further reduction in severance tax rates.

That bill is moving, although many expect it to fail, given the existing budget gap. They describe that effort as largely symbolic.

Dan Heyman, Public News Service - WV