– by Delegate Roger Hanshaw
For the past couple weeks, the top story in many news outlets has been the budget for the State of West Virginia and the process going on in Charleston this week to finalize a new budget for the 2017 fiscal year. Developing the budget for the State of West Virginia is arguably the most important responsibility of the legislative and the executive branches of government, and both the Legislature and the Governor are heavily involved in the work that leads to the budget each year. Despite its importance and the impact of the budget process on every West Virginian, for many people, the budget process remains a mysterious exercise far more complicated than it needs to be. If the budget process seems complicated and unnecessarily complex to you, that’s because it is.
According to the West Virginia State Constitution, the State of West Virginia must adopt a balanced budget each year. Unlike the federal government, the state cannot borrow money or run a deficit. The Legislature and the Governor are required under the state constitution to adopt a balanced budget. That process begins each January when the Governor submits a proposed budget to the Legislature for consideration. The Governor develops his proposed budget based on what he believes the state’s revenue collections for the next fiscal year will be. If the projected revenue is less than the amount the governor proposes to spend, then the governor must convince the legislature to either take money from the state’s savings account (called our Rainy Day Fund), or take some kind of step to raise more money.
After the governor submits his budget proposal, the House of Delegates and Senate consider the proposal and make any changes they believe to be necessary and send the budget back to the governor for approval. If the governor accepts the Legislature’s changes, then we have a final state budget. If the governor rejects the Legislature’s changes, he can veto the budget and force the Legislature to develop a new plan. It takes a 2/3 vote of both the House of Delegates and the Senate to override a veto if the governor chooses to veto the budget.
Many people have written lately that the state needs to run its budget just like a family runs its household budget – see how much money you have from your job and then base your spending on only that amount of money. In principle, developing the state budget should be that simple, but unfortunately it isn’t.
The budget for the State of West Virginia can be divided roughly into three parts – (1) money collected from taxes that goes into the state’s general fund (like a personal checking account), (2) money collected from special, dedicated sources that goes into various special revenue accounts (like a special savings account a family might set up for a specific purpose), and (3) money that comes from the federal government. When it comes to cutting spending on state government programs, the Legislature can really only work within the first pot, the general revenue spending. Taking money from the special revenue accounts requires the cooperation of the governor, and if he doesn’t agree, then that money isn’t available to be used to balance the budget. Similarly, the state can only use the federal money we receive for the specific purpose for which it was granted.
Over the past several months the Legislature has identified many places in our state government where sensible changes could be made that would reduce the amount of money required by the government and several special revenue accounts that have grown larger than necessary over time. However, without the consent of the governor, the Legislature cannot make these changes during the special budget session this week. In regular session the Legislature has broad authority to take whatever actions it believes to be necessary, but during a special session, the Legislature may only work on those things specifically identified by the governor. This year the governor decided not to include any of the proposed reforms on the special session call, meaning that those changes will unfortunately have to wait until the Legislature is back in regular session again in January.
A major contributor to the budget problems we are facing this year is the continuing decline in our state’s coal, oil, natural gas, and timber industries. These sectors of our economy have historically provided considerable revenue for state and local governments in the form of severance taxes. However, when these industries mine less coal, pump less oil and gas, and cut less timber, there are less severance taxes paid. That downturn leads to an even more troubling problem when income taxes and sales taxes derived from employee salaries in these industries also fade away. Severance taxes alone have historically contributed approximately 11% of the state’s overall budget each year, and when those payments go away, the state’s ability to continue providing services goes with them.
In the last week of the regular legislative session earlier this year, we learned that the state’s projected income for next year was being reduced by $92 million. That made it next to impossible to develop a new budget with only a couple days remaining in the session. During this special budget session going on now in Charleston, the House of Delegates, the Senate, and the Governor will be working together to address that shortfall through a combination of spending cuts, money taken from our savings accounts, and proposed tax measures. When he called the Legislature back into session last week, the Governor asked the members to consider raising the sales tax by one percent, adding a new tax on cell phones, and making the state tax tobacco products equal to that in surrounding states. So far, these tax proposals have received a fairly cool reception in the House of Delegates. The work we do this coming week will help determine what path the state chooses to balance the budget for 2017.
When it comes to balancing the state’s budget, lots of people have ideas that make sense. Many people have identified programs that no longer seem useful or services that we could do without as a state. In some cases, the Legislature will be seeking to eliminate those programs or services where possible. In other cases, the Legislature is simply prohibited from doing anything until January when it meets again in regular session. For many of us, some decisions seem obvious. Remember, however, when it comes to the budget, all the actions taken by the Legislature are for naught if the governor refuses to go along with a plan to reduce the size of government.
The leaders of the House of Delegates and the Senate have publically declared that all the necessary steps have already been taken to produce a budget that will fully fund the PEIA program and maintain the Promise Scholarship program. Those who say otherwise have simply not been paying attention. The final decisions on the rest of our budget will be made in the next few days. Just like we strive to do with our personal budgets, we eventually have to simply live within our means.