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Senate budget makes way for tax cuts

Senators on Friday started consideration of West Virginia’s general revenue budget, leaving room for the possibility of a tax cut.

“It contemplates the largest tax cut to the citizens of West Virginia in the history of West Virginia, passing the Senate,” Senate Finance Chair Eric Tarr, R-Putnam, said while describing the bill in committee.

Senate leaders, House leaders and members of the Justice administration have been discussing proposed tax cuts for weeks, with the governor and delegates advocating a big income tax cut and senators supporting a broader-based cut.

So, the details on taxes are still ahead.

Just the same, the Senate Finance Committee examined a $4.4 billion budget proposal Friday. The Senate also proposes more than $1 billion in surplus appropriations, which would be funded if the fiscal year concludes with revenues exceeding estimates.

The budget proposal leaves room for a $484 million tax cut.

“To me it’s an incredibly proud moment,” Tarr said, “to accomplish all that in one budget that is $300,000 less than the revenue estimate.”

That’s the start of what’s likely to be a back-and-forth over the budget over the next couple of weeks. The House of Delegates will get a crack at a version of the budget after this.

Gov. Jim Justice at the start of this year’s legislative session called for a “relatively flat,” $4.884 billion budget that includes pay raises for most state employees and some increased financial support for the Public Employees Insurance Agency.

State officials have been aiming for flat budgets even as state revenue figures continue to set records. The most recent monthly financial figures for the state show West Virginia is already about a $1 billion above estimates for this fiscal year.

One difference in the Senate’s proposal would change the average 5% pay raise for state employees to a $2,300 across-the-board pay raise for workers — a slight increase.

The Senate budget anticipates cutting $264 million in state spending on Medicaid and $220 million on social services.

Right now, West Virginia is running a budget surplus of hundreds of millions of dollars. But that’s based on several factors, including high energy prices that have produced high-performing severance tax returns and the likely stimulus of federal dollars. Revenue projections have also been held artificially low, keeping the base budget under control but leading to more reliance on surplus spending.

Sen. Jason Barrett, R-Berkeley, sought assurances on Friday that the many items in the surplus section of the proposed general revenue budget could be in line for future funding if the state’s economy would begin to perform at a slower pace.

“It assures that this is fiscally responsible and that we have the necessary funds to be able to make sure that these things in the surplus section of the budget are going to be funded as well,” Barrett said.

Kelly Allen, the executive director of the West Virginia Center on Budget & Policy, said the budget proposal is a sign of the state going backwards.

“After adjusting for inflation, the Senate Finance committee’s proposed general revenue budget is $777 million less than FY 2019’s. They pay for their proposed tax cuts by cutting Medicaid and social services and backfilling those cuts with temporary surplus dollars,” she said.

“While that might work this year, once the tax cut is fully phased in and temporary revenues come back to earth we can expect future legislatures to face the consequences which could include further budget cuts or raising other taxes.”