×

West Virginia lawmakers seek six-year financial plan as they consider Justice’s personal income tax cut

Senate Finance Committee Chairman Eric Tarr said Monday that Gov. Jim Justice should provide lawmakers with a six-year forecast of state revenues and expenses before the Legislature considers his 5% personal income tax cut. (Photo courtesy of WV Legislative Photography)

CHARLESTON — For years, lawmakers have requested to see long-term financial plans from Gov. Jim Justice and revenue officials in West Virginia with no luck. Now, lawmakers say they need to see these forecasts before considering Justice’s 5% personal income tax cut proposal.

In the House of Delegates Monday, Delegate Larry Rowe, D-Kanawha, introduced House Resolution 1 on the first day of the special session called by Justice. If adopted, the resolution would add a new provision to House Rules requiring a five-year projected fiscal analysis of any tax cut or increase by the Tax Department and other applicable agencies prior to consideration in the House.

Speaking Monday, Senate Finance Committee Chairman Eric Tarr said he hasn’t seen a long-term tax revenue and expenditure forecast in years. He said a multi-year forecast is vital in trying to see if the state can afford losing approximately $115 million in income tax revenue after fiscal year 2026 by returning that money to taxpayers.

“That’s part of … going into things eyes wide open,” said Tarr, R-Putnam. “It’s very important to have a forecast of revenues and expenses that are on the books.”

Justice and previous governors have traditionally provided lawmakers, the press and the public with six-year financial plans at the start of each legislative session prior to presenting their proposed fiscal year general revenue budgets during the annual State of the State speech. These six-year forecasts look at actual revenue and expenditures, budgeted revenue and expenditures, estimated revenue and recommended expenditures for the next fiscal year’s budget and projected revenues and expenditures over a four-year period beyond the budget being considered.

But beginning with first year of Justice’s second term in January 2021, his office stopped including six-year forecasts with his executive budget reports. According to the State Budget Office, the last publicly available six-year forecast was provided on Jan. 8, 2020.

Answering a question about why the state does not provide six-year-forecasts Tuesday during his weekly administration briefing, Justice said he would be willing to supply lawmakers the document. But he also said it was not fair of him to be criticized for not providing financial data to lawmakers to support his 5% personal income tax proposal.

“We have supplied more information than you could ever, ever supply, and we continue to do that,” Justice said. “But … I will make sure we supply just that.”

Justice went on to criticize the need for six-year revenue and expenditure forecasts. When he took office in 2017 as a Democrat, Justice had six months until the next fiscal year and a shorter timeframe to develop the general revenue budget, which included filling a potential $500 million drop in tax revenues and another $217 million short for the fiscal year he inherited from former Gov. Earl Ray Tomblin. Justice said the six-year forecast he received then showed massive deficits in the out-years going forward.

“Really and truly, that six-year plan was worthless,” Justice said.

The fiscal year 2018 budget developed during the 2017 legislative session led to a fight with the Republican-led Legislature, a budget veto ceremony involving a silver platter and cow dung and a crisis that ended in June 2017 with a budget that went into effect without the governor’s signature. But subsequently, the state ended fiscal years with larger and larger revenue surpluses due in part to maintaining flat budgets and artificially low tax revenue estimates.

“I’m a guy who believes in – realistically – hoping that the glass is half full rather than half empty,” Justice said. “Would it have made you feel better if I would have supplied or our tax people or Department of Revenue people would have supplied you a chart that every single year … like the charts that happened before I walked in the door … or would you rather have surpluses like you can’t fathom and all the goodness going on?”

The state Constitution requires West Virginia to end each fiscal year at the end of June with a balanced budget. Due to tax revenues being hard to predict further out, six-year forecasts typically show deficits in the out years. But Tarr said six-year forecasts are still valuable for seeing what may be around the bend when it comes to the economy.

“Those expenses are probably a little easier to forecast than the revenue, and the reason is because statute determines our expenses,” Tarr explained. “There’s laws in the book that says you’re going to have to spend this much money for a given purpose, so you can estimate that. … On the revenue side of it, you can go out and forecast out what it’ll look like if you go back and how much growth does the state normally have in revenue.”

Justice believes available one-time monies from surplus tax revenue and unappropriated monies for the current fiscal year – combined with the $1.2 billion in the state Rainy Day Fund and $400 million set aside in case of issues with the tax reform package of 2023 that cut the personal income tax by 21.25% and triggered the additional 4% personal income tax going into effect in January – will allow the general revenue budget to easily absorb another 5% personal income tax cut.

“This state is taking off like a blooming rocket ship,” Justice said. “We need to watch the economics of the store each and every single day, and we do … but the economics are right in this state.”

Tarr said both the House and the Senate have been trying to use their own internal numbers to determine whether the state can afford the 5% personal income tax cut going into the next fiscal year. He remains skeptical based on current annual growth in tax revenue and future growth in expenses on the state general revenue budget. Lawmakers will resume the special session Sunday to continue deliberations.

“Until somebody can tell us our numbers are wrong and show us that there’s a way to afford this tax cut without putting the people of West Virginia at risk … we do not want to fail them,” Tarr said. “You can’t afford 5% right now, nowhere that I can see.”

Steven Allen Adams can be reached at sadams@newsandsentinel.com

Starting at $2.99/week.

Subscribe Today