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 spending before the Legislature considers his 5% cut. of personal income tax. (Photo courtesy of WV Legislative Photography)

CHARLESTON — For years, lawmakers have asked to see the long-term financial plans of Gov. Jim Justice and West Virginia revenue officials, without success. Now, lawmakers say they need to look at those forecasts before considering the Justice Department’s proposed 5 percent personal income tax cut. In the House of Delegates on Monday, Delegate Larry Rowe, D-Kanawha, introduced House Resolution 1 on the first day of the special session called by the judge. If passed, the resolution would add a new provision to the House rules requiring a projected five-year budget analysis of any tax reduction or increase by the Internal Revenue Service and other relevant agencies before consideration by the House. Speaking Monday, Senate Finance Committee Chairman Eric Tarr said he hasn’t seen a long-term tax revenue and spending forecast in years. He said a multi-year forecast is key in trying to determine whether the state can afford to lose about $115 million in tax revenue after fiscal 2026 by returning that money to taxpayers.
“It’s part of approaching things with eyes wide open,” said Tarr, R-Putnam. “It is very important to have a forecast of income and expenses 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 before presenting their proposed general revenue budget for the fiscal year during the annual speech on the state of the state. This six-year forecast examines actual revenues and expenditures, budgeted revenues and expenditures, estimated revenues and recommended expenditures for the next fiscal year’s budget, and projected revenues and expenditures over a four-year period beyond the budget considered. But starting in the first year of Justice’s second term, in January 2021, his office stopped including six-year projections in its executive budget reports. According to the State Budget Office, the last publicly available six-year forecast was provided on January 8, 2020. Responding to a question about why the state is not providing a six-year forecast Tuesday during his weekly administrative briefing, the judge said he would. be prepared to provide the document to legislators. But he also said it wasn’t fair for him to be criticized for not providing financial data to lawmakers to support his 5% personal income tax proposal.
“We have provided more information than you could ever provide, and we continue to do so. » said justice. “But… I will make sure we provide just that.”
Justice then criticized the need to forecast revenue and expenditure over six years. When he took office in 2017 as a Democrat, Justice had six months before the next fiscal year and a shorter deadline to develop the general revenue budget, which included filling a potential shortfall in $500 million in tax revenue and an additional shortfall of $217 million for the fiscal year. he inherited from former Governor Earl Ray Tomblin. Justice said the six-year forecast he received then showed massive deficits in the coming years.
“In reality, this six-year plan was worthless. » said justice. The fiscal 2018 budget crafted during the 2017 legislative session resulted in a fight with the Republican-led Legislature, a budget veto ceremony involving a silver platter and cow dung and to a crisis that ended in June 2017 with a budget that came into force without the consent of the government. signature of the governor. But subsequently, the state ended fiscal years with increasingly large revenue surpluses, due in part to maintaining stable budgets and artificially low tax revenue estimates.
“I’m a guy who believes – realistically – in hoping that the glass is half full rather than half empty,” said justice. “Would it have made you feel better if I had provided you or if our tax people or the people at the Department of Revenue had provided you with a chart that every year…like the charts that happened before I walked in the door… or would you rather have surpluses you can’t imagine 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. Because tax revenues are difficult to predict over the longer term, six-year forecasts typically show deficits in later years. But Tarr said six-year forecasts are still useful for seeing what might happen when it comes to the economy.
“These expenses are probably a little easier to predict than income, and the reason is that the law determines our expenses,” Tarr explained. “There are laws in the book that say you will have to spend this much money for a given goal, so you can estimate it. … On the revenue side, you can forecast what it’s going to look like if you go back and what the normal level of state revenue growth is.
Justice estimates that one-time funds available from excess tax revenue and unallocated funds for the current fiscal year – combined with the state’s $1.2 billion Rainy Day Fund and $400 million put aside side in case of problems with the 2023 tax reform package which reduced the personal income tax by 21.25% and triggered the additional personal income tax of 4% which will come into effect effective in January – will allow the general revenue budget to easily absorb an additional 5% reduction in personal income taxes.
“This state takes off like a rocket in bloom” said justice. “We have to watch the economy of the store every day, and we do…but the economy is good in this state. »
Tarr said the House and Senate are trying to use their own internal numbers to determine whether the state can afford the 5% personal income tax cut next fiscal year. He remains skeptical about the current annual growth of tax revenues and the future growth of general state budget expenditures. Lawmakers will return to the special session on Sunday to continue deliberations.
“Until someone can tell us our numbers are wrong and show us there is a way we can afford this tax cut without putting West Virginians at risk…we don’t want them disappoint”, » Tarr said. “You can’t afford 5% right now, anywhere that I know of.”
Steven Allen Adams can be contacted at [email protected]