CHARLESTON - As negotiations continue between both chambers of the West Virginia Legislature toward ending the session Saturday with a budget, the state Senate is tying two key provisions supported by Gov. Jim Justice and the House of Delegates to future triggers in the state income tax.
The Senate Finance Committee amended and recommended for passage Wednesday afternoon House Bill 4883, relating to increasing annual salaries of certain employees of the state.
HB 4883 was the vehicle for Gov. Jim Justice's fifth pay raise proposal for teachers, school service personnel and West Virginia State Police troopers and employees. The original bill would have provided these state employees a 5% pay raise at a cost of more than $80 million. Raises for other state employees paid through the general revenue budget were included in Justice's budget bill.
But the Senate Finance Committee amended the bill Wednesday, lowering the raise percentage to 4% and linking a raise to a trigger in last year's personal income tax cut.
The Legislature passed HB 2526 during the 2023 session, cutting personal income tax rates by 21.25% across all six personal income tax brackets beginning last tax year. The personal income tax cut returns approximately $590 million to taxpayers.
The bill includes a trigger formula for further reducing personal income tax rates after Aug. 1, 2024, by comparing general revenue collections in a previous fiscal year minus severance tax collections compared to the base year of fiscal year 2019 and tied to the non-seasonally adjusted consumer price index.
If the general revenue collections minus severance tax collections exceed the adjusted base year, a reduction would be triggered. Personal income tax rate reductions would be limited to no more than 10% during a fiscal year.
In the Senate Finance Committee Amendment to HB 4883, teachers, school services personnel and state police employees would only receive the 4% raise if there is no trigger for income tax cuts in calendar year 2025. Despite questions of counsel by some committee members, only one member spoke against the amendment.
"I favor the pay raise, and I'm concerned that many of the public employees in my district could come away with a $200 tax cut if the trigger hits versus a $2,400 pay raise," said Sen. Mike Oliverio, R-Monongalia.
The Senate Finance Committee did something similar Tuesday with House Bill 4880, relating to the personal income tax Social Security exemption. The House version of the bill would phase out the remaining income tax collections on Social Security benefits for single filers earning more than $50,000 and joint filers earning more than $100,000. The phase-out would be retroactive to Jan. 1, reducing taxes by 35% this tax year and 65% in tax year 2025, with the tax phased out completely in tax year 2026.
But the Finance Committee amended HB 4880 to tie the reductions to the personal income tax trigger. If a trigger meets the 10% threshold, there would be no reduction of income taxes on Social Security benefits. But if the state doesn't meet the trigger, then income taxes on those remaining Social Security beneficiaries would be completely eliminated.
Both the pay raise proposal and the Social Security income tax cut were key parts of Justice's legislative agenda this year. Speaking during his weekly administration briefing Wednesday, Justice called on the Senate to consider restoring both bills to their original language.
"I know the Senate is still deliberating and changing this and changing that," he said. "The House has stood rock-solid for our pay raises. The House has stood rock-solid on the tax cuts. But the Senate is still thinking about it. There's no point in casting any stones or anything like that. I hope to goodness they'll come along and we'll be able to give our pay raises to our folks and we'll be able to give our tax cuts to our folks as well."
Senate Bill 200 is the vehicle for the budget bill setting the general revenue budget for fiscal year 2025 beginning in July. The budget that likely passes out of the Legislature by midnight Saturday will be a skinny budget as state officials await word from the U.S. Department of Education regarding a waiver after state education funding did not meet required thresholds for the more than $1.1 billion the state received in federal COVID-19 funds for county school systems.