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Despite House passage of budget bill, state’s financial plan unclear

CHARLESTON — Delegates passed a $4.99 billion general revenue budget that includes raises for state employees and a phase-out of state taxes on Social Security.

But, with just days left in the regular legislative session, the state’s financial plan is anything but clear. That’s because the Senate Finance committee chairman has continued to express doubt over whether the state can afford the pay raises and Social Security tax cut right now. And because a special session is already being planned for May to focus on financial matters.

Senate Finance Chairman Eric Tarr, speaking on MetroNews’ “Talkline,” expressed caution about additional state financial obligations in relation to a 21.25% personal income tax cut passed last year. He noted an upcoming trigger to reduce income taxes even more could amount to as much as $257 million.

“We cannot outpace our spending relative to that revenue decline,” said Tarr, R-Putnam.

Tarr also cited concerns over a $465 million obligation to the federal government that is the subject of current negotiations. That is a question of whether the state fell short on an obligation to maintain financial support for education at levels in line with overall spending after school systems accepted federal COVID relief dollars.

Guidance released in April 2021 specifies that if a state fails to meet requirements, then federal officials could seek recovery of funds, commonly described as a “clawback.”

“So there’s a lot of variables out there right now that you want to err on the side of caution on your spending growth,” Tarr said.

He said, “I’m not saying the sky’s falling. Don’t get me wrong. It’s not a panic situation. It’s a budget for the possibilities that can happen to you. And you’d rather be able to go in and make the spends later if you find yourself in the position that the revenue’s there on those unknowns then go in and make these spends now and find out the revenue’s not there.”

Gov. Jim Justice’s State of the State address proposed average 5% pay raises for public employees along with three tax breaks, including the one for Social Security.

The Senate Finance Committee on Tuesday afternoon advanced a bill that would peg the Social Security tax elimination to the personal income tax trigger. If the trigger is not hit for another broad personal income tax reduction, then all remaining Social Security beneficiaries would be relieved of their state tax obligation on the benefit.

The Senate has not accounted for the pay raises in its budget actions.

The House budget bill, which now goes to the Senate, includes both money for pay raises and the Social Security tax cut over three years.

But because of concerns about the $465 million obligation to the federal government, the House bill does not yet include potential surplus spending items — which are typically listed in order of priority and then funded if the fiscal year ends with a surplus.

Delegates of both parties proposed amendments that would have allocated surplus spending to a range of priorities. But leaders of the Finance Committee held firm, saying it would be unwise to lock those in right now while there’s still a question with the federal government.

“Why are we doing the budget right now, if we have all these unanswered questions?” asked Delegate Kayla Young, D-Kanawha, who had advocated making millions of dollars available to support child care.

Delegate John Hardy, the vice chairman of the Finance Committee, cited a constitutional obligation to pass a budget.

“Are we going to do a whole other budget in May?” Young followed up later.

Hardy said no, that the budget would pass within the regular session but the special session would serve as an addendum.

For now, said Hardy, R-Berkeley, “We are controlling the back of the budget this year. We’re trying to control what we’re spending there due to the uncertainty in our budget, in the front of our budget and with the uncertainty of the clawback.”