In the midst of a budget crisis, the West Virginia Senate is moving forward with a long-planned multi-million dollar tax cut for the state’s coal and gas industries proposed by Gov. Earl Ray Tomblin.
The bill (SB 419) would remove the “excess” severance taxes on coal and gas that companies have paid since 2005 and which were first implemented to help pay off the state’s old workers’ compensation debts.
Those debts have just about been repaid — more than 10 years ahead of schedule — thanks largely to the Marcellus Shale boom, which speeded up the payment plan considerably.
The Senate Finance Committee quickly approved the measure Friday morning.
In the midst of a major budget shortfall, with declining state revenues and ever-escalating cuts, no senator questioned the tax cuts.
Sen. Robert Plymale, D-Wayne, raised concerns that the bill also raises taxes on the state’s timber industry, but there was no other discussion.
The bill passed on a unanimous voice vote, in a committee room largely empty save for members of the governor’s staff and coal and gas lobbyists.
Tomblin’s office and senators from both parties said the tax cut was about keeping a promise — that the taxes were only in place until the workers’ comp debt went away.
“As Senate president, Gov. Tomblin made a commitment to remove excess severance taxes on coal and natural gas once the Old Fund liability was paid off,” Shayna Varner, a Tomblin spokeswoman, said.
She said that Tomblin understands the challenges that low severance tax collections — which are driving the current revenue shortfalls — play in next year’s budget.
“He has presented a responsible plan to balance our budget using no money from the Rainy Day Fund and without any across-the-board budget cuts beyond those already in place,” Varner said.
The tax cuts would remove a 56-cents-per-ton tax on coal producers and a 4.7-cent-per-thousand cubic feet tax on gas producers.
Those two taxes brought the state more than $122 million in fiscal year 2015, which ended in June. A fiscal note prepared by the state Tax Department estimates the tax cut will cost the state $110 million in revenue next year.
Senate Finance Chairman Mike Hall, R-Putnam, said there was no consideration given to leaving the taxes in place.
“That was a promise made years ago, that was an arrangement made when they accepted the 56 cents back when coal was really strong,” Hall said.
He said that leaving the taxes in place would make it impossible to ever implement temporary taxes in the future, like a temporary gas tax increase to fix the state’s decrepit roads, which has been discussed.
“Somebody said that a temporary tax never stays temporary and it’s hard to argue with that proposition, because that’s what’s been observed,” Hall said.
The bill, while removing the severance taxes for the long run, also helps address the immediate budget shortfall. With the workers’ compensation debt all but paid off, the funding that would have gone toward that for the last six months of this fiscal year will instead go to general revenue.
That means about $92 million (some from severance tax money, some from income tax) will go to helping fill this year’s budget deficit.
Senate Minority Leader Jeff Kessler, D-Marshall, said that the state needs more tax revenue, but that he would be leery of keeping the excess severance taxes in place.
“When we put this tax on, it was a specific tax for special revenue for a specific purpose,” Kessler said. “I have always been of the mind that people don’t believe government if you don’t follow through and do what you’re going to do.”
Kessler, who is running for governor, is the bill’s sole sponsor, but that’s just a formality.
By tradition, when the governor requests legislation, it is sponsored by the Senate president and the Senate minority leader.
Kessler said it’s been that way as long as he can remember, and that, in the past, he’s voted against the governor’s bills, even though he was technically the sponsor.
“As a courtesy, to get them introduced, I’d encourage the tradition that we’ve had in this body to continue,” he said.
But it’s a tradition that Senate President Bill Cole, R-Mercer, has dropped.
Cole, who is also running for governor, has so far declined to sponsor eight of the governor’s bills. Most of those bills relate to taxation (some cut taxes, some raise them), while one relates to medications that stop the effects of opioid overdoses and one would allow certain new entrepreneurs to collect unemployment benefits while they start a new business.
Cole noted that before the Republicans took power it had been 14 years since legislative leadership was of a different party than the governor. He said his choice not to sponsor the governor’s bills shouldn’t be considered a rift between the two branches of government.
“It’s simply a philosophical difference,” Cole said in a prepared statement. “I made a choice to not sponsor any tax increases because I do not believe now is the time to burden struggling West Virginia families.”