1. Ending West Virginia’s Budget Crisis: Avoiding Mistakes and Building Long-Term Fiscal Health
4th Annual Budget Breakfast, 23 February 2017
presented by
Ted Boettner, Executive Director
West Virginia Center on Budget and Policy
@WVCBP
@WVPolicywonk

2. Governor Justice’s FY 2017 Budget Closing the $213
Governor Justice’s FY 2017 Budget Closing the $213.2 Million Base Budget Gap
WC Debt Fund Reserve ($38.3M)
WC Debt Fund Reserve ($38.3M)
Source: WV State Budget Office

3. Governor Justice’s FY 2018 Budget Closing the $497 Million Budget Gap
$26.6 Million in Budget Cuts – 1/3 from higher education
WC Debt Fund Reserve ($38.3M)
WC Debt Fund Reserve ($38.3M)
$450.2 Million in Revenue – 40% from sales tax and 48% from CAT
Source: WV State Budget Office

4. Governor Justice’s FY 2018 Budget Save Our State and other major expenditures changes
Additional Budget Reductions in FY 2018 Base Budget
WC Debt Fund Reserve ($38.3M)
WC Debt Fund Reserve ($38.3M)
Budget Increases in FY 2018 Base Budget
Source: WV State Budget Office

5. Persistent Base Budget Gaps Since 2014 (in millions)
WC Debt Fund Reserve ($38.3M)
WC Debt Fund Reserve ($38.3M)
Budget gaps continue
despite revenue enhancements
and cuts
West Virginia’s
credit rating lowered
3 times since 2016
Revenues already $116.2 million below estimates
Source: WV State Budget Office

6. Higher education funding has sharply declined since 2008 (in millions)
Adjusting for inflation, higher education funding is down $123.7 million since 2008
Source: WV State Budget Office, U.S. Bureau of Labor Statistics (CPI Calculator), and WV Higher Education Policy Commission

7. Economic Growth vs. WV Budget Growth
State revenues at all-time WV would have $628 million in additional revenue in FY 2017
Economic Growth vs. WV Budget Growth
FY 2008 to FY 2016
WC Debt Fund Reserve ($38.3M)
One-time Revenues
WC Debt Fund Reserve ($38.3M)
The department of revenue projects that general revenue fund collection will be only $67 million more than we collected in ten years ago in FY 2008
Source: WV State Budget Office and U.S. Bureau of Economic Analysis. *Estimate based on projected $165 million gap & 3rd Quarter BEA data

8. Severance Tax and Business Franchise/Corporate Income Tax as a share of General Revenue collections Severance tax collections are back to 2005 levels
Growing severance tax collections helped stabilize business tax cuts until 2015
WC Debt Fund Reserve ($38.3M)
Severance Taxes
Business Franchise &
Corporate Income Taxes
WC Debt Fund Reserve ($38.3M)
COAL
& GAS
BUST
COAL BOOM
COAL BUST &
GAS BOOM
Source: WV State Budget Office

9. Tax change as a percent of income
Impact of Governor Justice’s proposed tax plan by income group Low-income West Virginians see largest change as a share of income
WC Debt Fund Reserve ($38.3M)
Tax change as a percent of income
and average tax change
WC Debt Fund Reserve ($38.3M)
Source: Institute on Taxation and Economic Policy (2017 Income Levels)
Note: Includes Sales Tax rate of 6.5% w/ some professional services and advertising, 0.2% Commercial Activities Tax, and 10 cent increase in motor fuel tax)

10. Impact of new General Consumption Tax by income group - Senate Leadership Plan (SB 335) Eliminate personal/corporate income and sales & use tax
Tax change as a percent of income
and average tax change
WC Debt Fund Reserve ($38.3M)
WC Debt Fund Reserve ($38.3M)
80% of households get tax increase Richest 20% get tax break
Source: Institute on Taxation and Economic Policy (2017 Income Levels)
Note: Includes elimination of personal and corporate income taxes and sales and use tax.

11. West Virginia would have the highest statewide grocery tax in the nation under SB 335
States that currently apply sales tax to groceries
WC Debt Fund Reserve ($38.3M)
WC Debt Fund Reserve ($38.3M)
Source: Federation of Tax Administrators
Note: State allows a rebate or income tax credit to compensate poor households. Also, there are places in
Alabama were tax on groceries reaches 10%.

12. Additional options for a more balanced revenue enhancement approach
Expressed In
Millions
Source: WV Department of Revenue and WVCBP calculations

13. Why is West Virginia SO POOR?
An inadequate physical infrastructure
Low post-secondary educational attainment
Outdated job skills
Low population density
A rugged topography
Unhealthy population
Resource curse (Undiversified Economy)

14. Building a Shared Prosperity in West Virginia
A Health Workforce, is a Productive Workforce
Raise “Sin” Taxes: Soda, Tobacco, & Alcohol.
Protect Medicaid, Paid Family & Medical Leave, & Paid Sick Days
Obesity & Opioid Prevention (evidence-based programs)
Boost Workforce Participation
Enhance Child Care Assistance
Refundable WV Earned Income Tax Credit & Child Care Tax Credit
Criminal Justice Reform & Subsidized Employment
Boost Pay, Education, and Skills
Raise and Index State Minimum Wage and Overtime Pay
Customized Workforce Training
Raise Teacher Pay & Make Higher Education Affordable
Infrastructure and Innovation (R&D, broadband and entrepreneurship)
Tax Fairness & Long-Term Fiscal Health