Senate accepts Future Fund changes
The Legislature has voted to set aside money for the future, but lawmakers had a difficult time agreeing how to do it.
Senate Bill 461 creates a Future Fund. Senate President Jeff Kessler, D-Marshall, has championed the idea for years. He represents an area of the state that is witnessing first-hand the economic boom brought by Marcellus Shale development. The fund, according to the original proposal, would have set aside 25 percent of oil and natural gas severance tax revenue above $175 million. The money would have remained untouchable until 2020, and then only the money earned on investments could be spent on educational improvements, infrastructure and economic development.
But the House of Delegates in the closing hours of the 60-day legislative session changed the bill, setting aside 3 percent of all severance tax revenues. There is no threshold the severance tax revenues must meet before money is set aside, which could affect the state budget. Kessler originally set the $175 million threshold because severance tax revenues aren't expected to reach that high for another two years, meaning the state's budget for the next two fiscal years wouldn't have been affected.
Senators voiced other concerns about the changes to the bill. Sen. Ron Stollings, D-Boone, said he worries coal counties won't see as big of a return on severance taxes if some of it goes to the Future Fund.
"I need to be convinced that we're not going to take away what comes back to mineral rich counties in the form of coal severance tax," he said. "In addition to what I call the economic diversification fund, this body in my opinion wisely decided to bring back another 5 percent to the county of origin. Now we hear 3.
"If we can't do something in our coalfields to diversify the economy, this whole state would be in trouble," he added.
Legislators also expressed concerns about the Rainy Day Fund - money the state has set aside for events like natural disasters. The state is expected to draw at least $88 million and as much as $125 million from the fund to help balance this year's budget. They expect to have to make the same move next year. Rainy Day must be funded at 13 percent of the state's overall budget. If the fund falls to less than that, the severance tax revenue would be diverted to that fund instead of the Future Fund. So that means it could take more than two years to deposit any money into the Future Fund.
"In my opinion, there's no way in the world unless the economy absolutely takes off with us, we would pass the first trigger that would allow the money in 2017 to come out," said Sen. Brooks McCabe, D-Kanawha. "It probably would not occur in 2018. What has to happen in those two to three years is we have to repay the $100 million-plus."
Kessler said after the session ended Saturday he was glad to see the bill pass but wishes the House had not changed it so drastically.
"The bottom line, the Senate version would have actually generated more money to the fund," Kessler said. "There was discussion of it coming out of the general revenue budget. The House version was something like $60 million by 2019 where the Senate version would have been $110 million."
Kessler contends the Future Fund would end future instances of poverty in West Virginia and that something similar to the fund should have been set up decades ago when coal was king. He said by now, the state would have at least $1 billion in such a fund and wouldn't have to dip into Rainy Day to balance the budget.
"Again I think it's an absolutely huge step for West Virginia that we're going to break the cycle of poverty with the resources we have and to use wealth to create a fund that can be expanded upon," Kessler said.
The amended version of SB 461 passed the Senate 32-2, with Sens. Mitch Carmichael, R-Jackson, and Craig Blair, R-Berkeley, voting against. It will now head to Gov. Earl Ray Tomblin for his signature or veto.