State must be prudent with budget surplus
Gov. Jim Justice gave his third State of the State speech Wednesday night. These annual speeches are the ceremonial kickoff to the 60-day legislative session, and Justice used it to outline his hopes for the session.
Among Justice’s proposals is eliminating the state income tax on Social Security benefits, which will cost the state treasury about $50 million a year. He also wants to phase out the business inventory tax, which has been an unmet goal of governors and businesses for years, and he wants to increase the supplement to PEIA by $150 million. And there are others. Justice wants an additional $25 million for substance abuse programs, for example.
When you compare Justice’s proposed tax cuts with his spending increases, it becomes clear that this is a pretty expensive wish list. On Thursday, Michael Cook, Justice’s Budget Office director, said Justice’s proposed state budget includes $200 million in onetime supplemental appropriations. That money will come from two sources. Justice increased the revenue estimates for this fiscal year by $142 million. To that he added $58 million that was put into this year’s budget but was never appropriated by the Legislature.
That may be a good idea. Or it may not. Either way, it’s a risky one.
In the first half of this fiscal year, which ends June 30, the state took in $185 million more than it had estimated. That’s good news, but it does raise two questions: If West Virginia tax revenue is $185 million above estimates, does that mean the estimates were that far off, or did the governor deliberately understate them in preparing the budget so he would have a cushion to play with later?
This is not a complaint. Having $185 million in hand is far, far better than saying the state took in $185 million less than projected. It’s good that the governor and the Legislature prepared a budget that was fiscally prudent. It’s good management, and despite his many flaws, Justice should be credited with helping avoid another budgetary crisis involving layoffs, hiring freezes and cutbacks. The Legislature also would share in that credit.
Of course, the fiscal year still has six months to go, and unforeseen events can wreck the best plans.
Perhaps the best observation of the State of the State came from House of Delegates Minority Leader Tim Miley, D-Harrison.
“I didn’t hear anything in his speech that will make West Virginia a compelling place for people to want to stay here or come here and move for the first time,” Miley said. “There’s a lot of problems he’s trying to fix in our state, but none of which are going to be appealing to people outside of our state.”
To be fair to Justice, many of West Virginia’s problems are not the direct responsibility of state government, but Miley has a point. The Legislature has a role to play in making West Virginia an attractive place to live, but it is only part of the solution.
The key words as the legislature evaluates Justice’s proposals or offers its own will be prudence and restraint. It’s nice to have that $200 million to work with, assuming Justice’s numbers are accurate. If it is to be used, it should be for onetime expenditures. Revenues are helped by a surge in natural gas pipeline work that is slowing down.
Starting ongoing programs at a time when revenue is uncertain is not a good idea. The Republican Party waited decades to regain control of the Legislature. Frittering away a budget surplus is a good way to go back to minority status.