Lawmakers moved closer Wednesday to taking a second hiatus from the special legislative session on the 2017-18 West Virginia budget, as support for a Gov. Jim Justice/Senate compromise revenue plan continued to unravel on the session’s fifth day.
Despite a pep talk Tuesday from Justice on the Senate floor encouraging support for the revenue plan (Senate Bill 1007), the 19-11 passage vote in the Senate marked the defection of 10 Democratic senators who had voted for a similar revenue plan on May 5.
In a similar impromptu address to the House of Delegates on Wednesday afternoon, Justice described the defection of Senate Democrats as “despicable,” “terribly disappointing” and “petty politics.”
He urged House Republicans, who have twice summarily rejected similar revenue plans, to support the budget bill.
“If you’re a Republican, when you balance the budget, lower spending and cut taxes, it’s got to be a daggone good thing,” he said. “If you want to tweak and modify it, tweak and modify, but vote.”
Senate Minority Leader Roman Prezioso, D-Marion, said Wednesday that many Senate Democrats had begrudgingly supported the earlier version of the budget bill to keep negotiations alive.
“For the most part, we support the governor’s plan, but the income tax part — shifting the burden from the rich to the poor — is not right,” Prezioso said.
He said the House has sent a clear message where it stands by twice rejecting plans that would reduce state income tax rates.
Prezioso said a presentation to the House Finance Committee from analysts with the Public Resource Advisory Group, an independent financial advisory firm, on Tuesday afternoon also was an eye-opener for Senate Democrats.
The PRAG analysts advised that the nation’s three major bond rating agencies would not look favorably on a massive income tax cut in the middle of West Virginia’s ongoing revenue shortfalls, and suggested that it likely would lead to further downgrades in the state’s bond ratings.
As drafted, the bill that passed the Senate closes the 2017-18 budget deficit by increasing the sales tax to 6.95 percent and eliminating a number of sales tax exemptions. But the proposal would create future budget deficits, projected to begin in 2018-19 as the $380-million-a-year reduction in income tax collection kicks in.
Prezioso said eliminating income taxes entirely might spur economic growth but the proposed 20 percent phase-out over two years, followed by future reductions if the state economy meets certain thresholds, won’t work.
Income taxes are the largest and most stable revenue source in the state budget, providing about $1.9 billion of the $4.3 billion general revenue budget.
“It’s piecemeal,” Prezioso said of the plan. “We don’t have 10 to 12 years to get this budget in order.”
“The one thing that’s clear is this is a trickledown economics bill,” Sen. Mike Romano, D-Harrison, said in a floor speech Tuesday evening, saying that lower- and middle-class West Virginians would bear the burden of giving a tax break to the wealthy.
“It doesn’t make sense to me,” he said. “We’ve got to be taxing somebody.”
On Wednesday, Justice argued that the state will avoid out-year shortfalls from the income tax cuts through new income from the jobs that would be created if the Legislature approves his plan to sell up to $2.8 billion in road bonds for a massive economic stimulus program that will create what he said Wednesday will be “10s and 10s and 10s of thousands of jobs.”
“Those road jobs save your blooming bacon for a long time,” he told the House.
The House Finance Committee is holding three versions of the budget plan: SB 1007, the compromise plan that raises sales taxes and lowers income tax rates; HB 107, the original version of that bill; and an as-yet undisclosed alternative to be originated in committee.
So far, the committee has yet to take up any of the bills, but is scheduled to meet again this morning.
House Majority Leader Daryl Cowles, R-Morgan, said Wednesday that several scenarios are being considered, but the likeliest is to amend the House proposal into the Senate bill, with the intent of getting the bill into a House-Senate conference committee.
Under that scenario, the conferees could work on coming up with a compromise plan while the special session recesses to a future date — May 30 has been discussed — to avoid the roughly $35,000 a day cost of having the full Legislature meet in special session.
The Senate, meanwhile, recessed Wednesday evening until 6 p.m. today, with bills still pending to fund Justice’s road building plan by increasing the state gas tax and various Division of Motor Vehicles fees and by extending and raising tolls on the West Virginia Turnpike.
Reach Phil Kabler at firstname.lastname@example.org, 304-348-1220 or follow @PhilKabler on Twitter.