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Projected 2017-18 WV budget deficit nears $500M

AP file photo
West Virginia’s newly refinished Capitol dome is shown on Oct. 14, 2005, in Charleston. The dome had received a facelift over the past year.

Legislators and the Justice administration will need to close a nearly half-billion dollar shortfall in the 2017-18 West Virginia budget, according to the bill that outgoing Gov. Earl Ray Tomblin submitted to the Legislature last week.

Tomblin’s budget bill projects a shortfall of $497 million in the 2017-18 spending plan. In December, then-Revenue Secretary Bob Kiss told legislators the deficit would be “north of $400 million.”

Legislators also will need to close a funding gap totaling $213.7 million in the 2016-17 budget, according to the executive budget brief Tomblin submitted with the budget bill. That’s larger than the $165 million shortfall for 2016-17 that Kiss told legislators to expect during the December interim meeting.

Tomblin proposes closing the current year’s gap with $60 million in mid-year spending cuts and taking another $34 million from the Rainy Day reserve funds, as well as one-time revenue transfers.

As he announced in his farewell address, Tomblin proposes a total of $274 million a year in tax hikes to help close the 2017-18 deficit.

Tomblin’s budget bill includes a 1 percent increase in the consumer sales tax, to raise $200 million a year, as well as elimination of the sales tax exemption on telecommunications services, to raise $70 million, and on sales of digital downloads, to raise $4 million annually.

Tomblin also would transfer $38.25 million from the Workers Compensation Debt Fund — the current budget transferred $25.5 million from that fund — and would suspend the annual transfer of $11.7 million in general revenue funds to the Division of Highways, raising a total of $323.95 million to help close the shortfall.

“Budget reductions are never easy, nor are tax increases,” Tomblin wrote in the executive budget brief. “But as good financial planners, we must continue to be good stewards of taxpayer dollars.”

Tomblin’s 2017-18 budget bill has a base budget — including general revenue and state Lottery profits — of $4.76 billion, which is $56.5 million larger than the 2016-17 budget.

That includes putting an additional $74 million into government pension funds, including $66.8 million into the Teachers Retirement System, to offset the failure of pension fund investments to achieve the required 7.5 percent annual growth in the prior budget year, and also increases Medicaid match funding by $10.4 million.

Conversely, the budget includes $17.46 million in additional spending cuts.

The executive budget brief blames a weak state economy for the ongoing budget crunch, noting a 1.5 percent downturn in employment over the past four years that has cost 11,000 jobs, with job losses in the mining and construction sectors approaching 24 percent.

Except for a rebound year in 2010-11, state tax collection has decreased by an average of 0.2 percent a year from 2007-08 to 2015-16, the brief notes.

As with all outgoing governors, Tomblin’s budget bill is essentially a suggestion, and the Justice administration is free to come up with an entirely different budget plan.

In the past, though, most incoming governors have used the previous governor’s budget bill as a framework, since the new governor has 30 days to prepare a budget bill — a process that normally takes five months.

In his inaugural address on Monday, Gov. Jim Justice said, “We have got to find a way to raise revenue. We cannot continue to just kick the can down the road and drain more of the Rainy Day [funds].”

Last week, Justice chief of staff Nick Casey said there appears to be little support for tax increases among legislative leadership, noting, “They’d like to see cuts first.”

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

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