Analyst: West Virginia Budget Suffers From Stagnate Revenue
WHEELING — Sean O’Leary, senior analyst for the West Virginia Center on Budget and Policy, spoke of the state’s fiscal predicament Thursday, urging legislators to seek new sources of revenue rather than cut higher education and social services.
O’Leary showed that in the last decade, the combination of tax breaks, a loss of about 12,000 jobs statewide, and a steep drop in natural gas sales have created the nearly $500 million budget deficit legislators in Charleston now face.
He said some of the cuts proposed throughout Gov. Jim Justice’s budget — and even more so in the budgets offered by the West Virginia House of Delegates and Senate — would have adverse effects on state residents stuck with low incomes.
He offered this analysis to about two dozen interested residents at the Ohio County Public Library.
Suggestions O’Leary made included reverting the business franchise tax to 0.70 percent and a corporate income tax to 9 percent.
Both of which were cut significantly in 2007 and ultimately led to $219 million in lost annual tax revenue, he said.
Also, O’Leary said reinstating the state’s grocery tax, another cut made in 2007, which would generate $170 million each year.
Even if the legislature manages to balance the budget for fiscal year 2018, O’Leary said projections show a $38 million deficit in fiscal year 2019 and a $49 million gap in fiscal year 2020.
“We’re really not out of the woods,” he said. “Despite all those efforts, we’ll likely see deficits continue to grow.”
O’Leary said West Virginia has not experienced any revenue growth in 10 years, while he said the state held $570 million more in tax revenue about a decade ago.
He said while the state experienced budget problems prior to 2016, the sharp decline of natural gas prices exacerbated the situation.
West Virginia’s severance tax is currently applied to natural gas and coal as the materials are sold, not as they are extracted.
O’Leary made the point that with House and Senate proposals to cut Medicaid funding, the state will miss out on significant federal dollars offered as a match for the state spending on such programs.
He said for every $1 West Virginia spends on Medicaid, the state makes $3 from the federal government.
The Senate proposed cutting $26 million in Medicaid spending. The House is after a $10 million Medicaid reduction.