Gov. Jim Justice’s 2017-18 budget plan would close a nearly $500 million shortfall by raising $450 million in new taxes — the largest being a 0.2 percent gross receipts tax on businesses to raise $214 million — and by imposing $26.6 million in what he called responsible spending cuts.
Anticipating that the Legislature might balk at the tax hikes, the Justice administration Wednesday provided an alternative budget plan that cuts state spending by $450 million, which would require entirely eliminating general revenue funding for most state colleges and universities, as well as for a variety of programs, including Promise scholarships, senior services, in-home care for seniors, the Department of Veterans Affairs, Health Right free clinics and grants to public libraries, among 21 other program cuts.
Those cuts would eliminate nearly 3,000 government jobs, according to the Governor’s Office.
Revenue Secretary Dave Hardy said talk of cutting the way out of the budget shortfall makes for “good soundbites” but would have a devastating impact on the state.
Justice also is proposing an ambitious transportation investment plan that would raise an estimated $1.4 billion for highway construction through the sale of:
n $400 million in general obligation bonds if voters approve a Better Roads Amendment to the state Constitution. Those bonds would be funded, in part, by raising the DMV license fee from $30 to $50.
n $500 million in Turnpike bonds, to be funded by raising and extending tolls on the West Virginia Turnpike for an additional 20 years. That plan also would require raising tolls for passenger cars from $2 to $3.
n $500 million in GARVEE bonds, which are financed against future federal highways fund payments to the state.
The highways funding plan also proposes raising the excise tax on gasoline by 10 cents per gallon.
Transportation Secretary Tom Smith called the proposal a “tremendous investment in West Virginia infrastructure,” which he said also could jump-start the state’s economy by creating up to 25,000 jobs.
Hardy said Justice believes it would be irresponsible to make additional across-the-board spending cuts, after the Tomblin administration imposed nearly $600 million a year in across-the-board cuts over the past five years.
Justice is proposing $26.6 million in cuts, with the largest being $5.9 million from West Virginia University’s budget, as the budget proposes 4.4 percent general revenue cuts for WVU and Marshall ($2.8 million).
The budget proposes eliminating general revenue funds for seven programs, with the largest cut being $4.6 million for the Educational Broadcasting Authority, out of a total operating budget of $10.7 million.
Culture and History would receive a $4.3 million cut, which Justice officials said would be partially offset by shifting about $1.8 million in Lottery funds that the division is currently required to distribute to fairs and festivals statewide.
Justice’s budget does include at least one revenue enhancement, providing a $21 million increase to give classroom teachers a 2 percent pay raise.
Besides the gross receipts tax, called a Commercial Activities Tax in the budget bill, Justice proposes raising the consumer sales tax from 6 percent to 6.5 percent, to raise nearly $93 million per year.
Before leaving office in January, then-Gov. Earl Ray Tomblin submitted a 2017-18 budget bill that called for increasing the tax to 7 percent.
Justice’s budget also would raise nearly $88 million per year by eliminating sales tax exemptions for advertising and for yet-undisclosed professional services. A similar proposal to repeal tax exemptions was tabled by the House of Delegates last year on a 92-2 vote.
The budget plan also would shift $38 million of a $50 million annual payment used to pay down old Workers Comp unfunded liabilities to general revenue, while retaining $11.7 million that has been transferred to the state roads fund in the past.
Justice’s plan also would raise the state beer tax and increase the wholesale mark-up on liquor to raise $5.6 million per year, which would be dedicated to the Division of Tourism.
The $214 million gross receipts tax on business would follow nearly a decade of cuts in state business taxes, including elimination of the business franchise tax and rollback of the corporate net, that have cut state revenue by more than $300 million per year.
Reach Phil Kabler at email@example.com, 304-348-1220 or follow @PhilKabler on Twitter.