Budget looms large in WV’s January session

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The following legislative session curtain raiser comes by way of Dentons 50 partner Jason Webb.

The biggest issue looming over West Virginia for the upcoming 2017 legislative session will be its budget. Now, the Mountain State is not alone in its fiscal challenges as many states have struggled with their own deficits. What makes WV unique is the size of the budget shortfalls in relationship to its revenues in the post-2009 economy.

WV’s budget is approximately $4 billion in general revenue, not including federal dollars which are leveraged through various matching programs. West Virginia faced a $270 million deficit last year and has an estimated a $350 million shortfall for FY2018. This will require a 16% reduction if the budget for those two fiscal years.

The ongoing budget shortfalls are directly related to the fall in revenue collections from severance taxes. Half of the deficiency in revenues stems from both lower production and lower prices of coal. The loss of over $300 million from coal’s decline has put a huge burden on this energy dependent state.

During the 2016 session, lawmakers were faced with a $270 million budget shortfall. After passing a 65-cent cigarette tax increase (which added $95 million to state coffers) and $110 million in budget cuts, legislators still needed to take $65 million from the State’s “rainy day” fund.

During the 2017 session, policymakers will again face difficult choices as to what additional cuts can be made versus raising taxes. Some of the items on the table include a 6% telecommunications tax, removing service tax exemptions for professional services and increasing sales tax from 6% to 7%.