Senate, House budgets would raid WV Rainy Day funds

By Phil Kabler, Staff Writer

The state Senate and House Finance committees on Monday unveiled budget bills that significantly raid West Virginia’s Rainy Day emergency reserve funds to close a $270 million shortfall in the $4.1 billion general revenue budget.

The Senate plan would take $135 million from the Rainy Day A account — nearly one-third of the $422 million in the fund.

“I’m not so sure the ink will be dry before the governor vetoes it,” Senate Minority Leader Jeff Kessler, D-Marshall, said of the Senate budget bill (SB 1001). The bill advanced from the Senate Finance Committee on Monday, with all nine Republicans in favor and all eight Democrats against.

Revenue Secretary Bob Kiss stopped short of saying Gov. Earl Ray Tomblin would veto a budget bill that relies so heavily on Rainy Day funds, but said, “There is a number beyond which I think the governor will say, ‘I’m not going to participate in that level of Rainy Day spending.’ ”

The bill also imposes an additional $36.7 million in spending cuts, with 2 percent across-the-board cuts for many agencies, as well as 10 percent cuts for the offices of the governor, attorney general, secretary of state, auditor, treasurer, and agriculture commissioner.

That’s on top of $86 million in cuts in the budget bill proposed by the Tomblin administration, bringing total cuts in the budget to more than $122 million.

However, the plan exempts public education, higher education, Department of Health and Human Resources, the State Police, Corrections and Senior Services from further cuts, and fully funds state scholarship programs, including Promise, as well as PEIA employer premium increases.

“It’s not a budget I’m happy with, but July 1 is down the road,” Senate Finance Chairman Mike Hall, R-Putnam, said of the plan, referring to the date state government will shut down if a 2016-17 budget has not been passed.

House Finance Committee members were slated to take up a similar budget plan Monday evening, as the special session on the budget impasse concluded its sixth day.

Meanwhile, a critical vote on the fate of the 2016-17 budget comes today, when the House of Delegates will take a passage vote on legislation to raise tobacco taxes by as much as $78 million a year (SB 1005).

A similar measure to raise cigarette taxes by 45 cents a pack was crushed in House Finance Committee during the regular session as anti-tax Republicans joined Democrats who favored a $1-a-pack increase in defeating the measure by a 22-3 margin.

On Monday, the House soundly rejected, on a 67-28 vote, an amendment by Delegate Marty Gearhart, R-Mercer, to exempt smokeless tobacco products, pipe tobacco, cigars and e-cigarettes from the tax increase.

However, the House adopted, on a 52-43 vote, an amendment by Delegate Larry Faircloth, R-Berkeley, to remove a proposed new tax on e-cigarette liquids that would raise about $1.8 million a year.

Proponents argued against the tax, contending that e-cigarettes provide an option for smokers to wean themselves off cigarettes and that it would hurt small-business entrepreneurs who operate “vape shops” around the state.

The amendment divided House Republicans, who voted 31-30 against the measure, but had a strong 22-12 margin of support among Democrats. Five delegates were absent Monday.

While the amendment complicates matters — the Senate will either have to concur on exempting e-cigarettes or send the bill to a House-Senate conference committee — House leaders were optimistic it could help garner support for what is believed to be a razor-close passage vote in the House today.

“Maybe a couple of members who are on the fence will be in support of moving forward with this,” House Finance Chairman Eric Nelson, R-Kanawha, said Monday of the amendment.

Underlying the significance of today’s vote, Nelson added, “Tomorrow’s vote is our budget.”

House Majority Leader Daryl Cowles, R-Morgan, said of today’s vote, “I’m still hopeful we get some bipartisan cooperation and support for the governor’s proposal.”

Notably missing Monday was any amendment to raise the cigarette tax to $1 a pack, a proposal favored by many House Democrats.

House Minority Leader Tim Miley, D-Harrison, said members of the Democratic Caucus decided not to propose a $1 amendment, since it was clear a majority of House members would vote against it.

At the start of the special session, on May 16, Tomblin put three tax proposals on the special session call and encouraged legislators to come up with some combination of the three to raise the $270 million needed to close the budget shortfall.

Leadership in the House and Senate quickly rejected two of the options — eliminating the sales tax exemption for telecommunications services, to raise $60 million a year, and an increase of the consumer sales tax of up to 1 percent, to raise up to $196 million a year — leaving the tobacco tax increase as the only viable option to raise revenue.

At least three of the cost-savings proposals in the Senate budget bill — elimination of $15.1 million in greyhound racing purse and breeders’ fund subsidies, elimination of a $9 million matching fund for racetrack casinos to upgrade their gaming areas and a minor adjustment to the School Aid Formula, to free up $15.2 million — likely would require Tomblin to amend the special session call to add bills that would enact those cost-saving measures to the agenda.

The Senate budget bill also cuts the $1.8 million in funds distributed annually to support fairs and festivals around the state by 25 percent, a cut of about $462,500.

Afterward, Hall compared the budget plan to the continuing resolutions used in many states to fund state agencies in lieu of passage of a budget bill. West Virginia law does not have a provision to use continuing resolutions to maintain state government operations after July 1.

He noted that $36.7 million of proposed spending cuts is on top of $86 million in cuts in Tomblin’s budget plan and follow nearly $212 million in state spending cuts enacted since 2013.

“This is not like we’ve been spending like drunken sailors. There’s been base [budget] cuts prior to this,” Hall said.

He also noted that, in recent years, the Legislature has approved tax cuts totaling nearly half-a-billion dollars a year, commenting, “We probably overshot on the revenue side in what we cut.”

On Monday, Kiss raised concern about relying so heavily on one-time funds to close the 2016-17 budget deficit, particularly since the 2017-18 budget already is looking at a potential $300 million shortfall if no taxes other than the tobacco tax are approved in special session.

“This is a revenue problem, not a spending problem,” he said, adding, “Even with the $78 million, you still have significant challenges that are going to play out over the next year.”

Similarly, Kessler said he had great concern about what he called the “huge, unprecedented raiding of the Rainy Day Fund.”

“I’m afraid draining our savings account just to get out of town is not appropriate,” he added, saying the Legislature needs to come up with a long-term fix to the budget crisis.

Reach Phil Kabler at philk@wvgazettemail.com, 304-348-1220 or follow @PhilKabler on Twitter.