In a special session weeks before the election, lawmakers approve a tiny tax cut and dole out millions for local projects. But West Virginians struggling for child care got little in the way of help
by Henry Culvyhouse for Mountain State Spotlight
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In mid-September, Gov. Jim Justice told the people of West Virginia he’d be calling the Legislature back into session at the end of the month.
“I promised you I’d fight like crazy for a 5% tax cut, I promised you I would try to help out with child care,” he said.
When the gavels slammed concluding the special session on Tuesday, most West Virginian families would get an average of 40 cents a week from the tax cut.
Little was done on getting that help for child care. And the money for the tax break came, in part, from the agency that oversees child care.
How much is the tax cut?
Going into the session, Justice asked the Legislature to pass a 5% income tax cut, on top of a 4% cut that’s effective Jan. 1, 2025 and a 21.25% cut last year.
But high ranking members of the Senate, notably Finance Chairman Eric Tarr, bristled at the suggestion, fearing it could put the budget at risk down the road. On Monday, the governor changed his proposal to a 2% cut.
Revenue Secretary Larry Pack, who oversees the state’s budget preparation, told the House Finance Committee he didn’t have an idea how much the tax cut would actually put in the pockets of West Virginians.
Kelly Allen, director of the West Virginia Center of Budget and Policy said budget modeling shows the average West Virginian will save $21 a year in taxes – the equivalent of a pop, a king size candy bar and less than $15 on pump 8.
Del. Larry Kump, R-Berkeley, defended the tax cut, despite its relatively small size.
“Anything we do to reduce the tax burden on our families is a good thing,” Kump said.
While the amount was a point of contention – House Republicans said they were happy with the Governor’s initial 5% – the way they will pay for it caused an uproar from the minority caucus.
The total cost is $46 million, of which $19 million comes from retiring a Wise Administration-era bond.
Most of the money, $27 million, according to Pack, would come from the cost savings resulting from the breakup of the Department of Health and Human Services into three agencies. The new Department of Human Services oversees a dysfunctional foster care system and a child care subsidy program that could run out of cash by the end of the year.
Lawmakers pressed Pack on just where in the former department’s $1 billion budget the cuts came from. Pack said he didn’t have it in that detail.
“Trying to find $20 million is not very hard,” he said.
What did they do for child care?
Twice already this year, lawmakers have come to Charleston and adjourned without doing anything to address West Virginia’s child care shortage.
By August, 60 child care centers across the state had closed. A key federal subsidy program is used by thousands of low-income families to afford child care in West Virginia. This program faces a $23-30 million funding shortfall but state officials have found enough federal money to fund it through the end of the year.
Instead of addressing this budget hole, the governor called for a non-refundable $1,500 maximum tax credit for child care. It would allow families to get up to $1,500 taken off their tax bill that had been spent on child care. But if they owe nothing in taxes, they don’t get any money.
But Allen said that wouldn’t do much good by only benefiting parents who already have children in child care.
An estimated 20,000 children in West Virginia need child care but can’t get it because there are not enough open slots. An analysis from the West Virginia Center on Budget and Policy said it would take around $100 million to solve the issue.
The governor also proposed $5 million for a “child care expansion pilot program” which would hire a consultant to study the problem and help develop small child care centers.
This idea faced choppy waters on the House floor Tuesday evening as lawmakers took issue with spending money on an outside study of a well-known problem.
“If we have $5 million, we have a list of things the child providers said will actually help,” said Del. Joey Garcia, D-Marion.
Garcia called for the bill to be postponed indefinitely. By a vote of 47-40, it was.
Del. Kayla Young, D-Kanawha, sponsored several bills to address childcare, including $4.3 million for the federal subsidy program, $1,000 refundable tax credits for child care and to subsidize day care workers for their own child care. All those bills were sent to committees and never taken up.
Plugging the holes in the state budget with one time money
The roughly $500 million went to a variety of projects. Of that, $125 million went towards water and sewer projects. Another $100 million went towards those projects too, but they were placed in the Governor’s Civil Contingent Fund.
That fund is the governor’s discretionary fund. While some items in that budget are already spoken for, finance committee testimony revealed there’s $81 million that isn’t – enough to cover most of the Center of Budget and Policy recommendations for addressing child care.
The $500 million came out of the state’s surplus, the extra money left over from the prior budget year. Over the last few years, the state has enjoyed an unprecedented surplus. Last year, state revenues came in $1.8 billion over.
But these surpluses were largely driven by a flood of federal funding during the COVID-19 pandemic and lowballed estimates from the governor, Allen said.
On top of that, in 2022 the severance tax collections went through the roof after natural gas prices rapidly rose when the Russians rolled tanks into Ukraine. That severance tax is historically volatile and as quick as the prices rose in 2022, they busted the next year.
But according to the governor’s numbers he sent to the state Senate, the flush times are coming to an end. In next year’s budget, state officials project to have an $80 million surplus.
This, according to both lawmakers and critics, is a result of “flat budgeting” – keeping the same amount of spending year to year, without fully accounting for inflation.
In the past, Republican leadership has said flat budgeting forces agencies to find efficiencies, but this philosophy also stretches agencies at a time when West Virginia has a wide variety of urgent needs. For example, during a House Finance Committee meeting Monday, state corrections officials said they need $17 million more each year to keep facilities running.
Billy Marshall, commissioner of the Division of Corrections and Rehabilitation, told the committee that when staffing was short, jails and prisons were using money budgeted for vacant positions to pay for operating costs, like food, medical services and utilities. Now that more than 700 positions have been filled, the agency will no longer be able pull cash out of those accounts.
Lawmakers also spent $87 million to keep afloat the Public Employees Insurance Agency.
PEIA – the source of healthcare benefits for the state’s employees – had depleted a required reserve account because the costs of drugs and doctor’s visits are outstripping the cash on hand.
Brian Cunningham, director of PEIA, told the finance committee the agency is making moves to reduce costs and raising premiums for state employees, but it really needed the money to avoid a 20% midyear premium hike, or the agency being declared shaky by the financial markets.
On the floor, Del. Evan Hansen, D-Monogalia, said using surplus money to address ongoing costs won’t work, especially as surplus amounts continue to dwindle.
“There’s a lot of services that the people of West Virginia expect from their state government and deserve,” Hansen said. “If they don’t have surpluses anymore, government’s not going to be able to take care of those priorities.”
But Finance Chair Del. Vernon Criss, R-Wood, said the surplus items are all “one-time spends.” He said while certain revenue streams, like the personal income tax, are decreasing by design, economic growth will offset it.
Meanwhile, as lawmakers sorted out the hole for PEIA, 1,300 road workers gathered on the Capitol steps with the governor to mark the anniversary of Justice’s “Roads to Prosperity” highway building program. A loudspeaker blasted Kool & the Gang’s “Celebration”, rattling the windows of the finance committee room.
As Justice called for the road projects to keep going, he turned around on his stool to the men and women wearing high-visibility yellow shirts.
“I mean this, I love every last one of you,” he said. “You did the work, you pulled the rope, you absolutely made all this happen.”
The next day, PEIA’s finance board announced a planned premium increase of about $30 a month for average state employees like roadworkers.
