CHARLESTON, W.Va. (AP) — As the struggling coal industry and low natural gas prices continue to hurt state tax revenues, West Virginia Gov. Earl Ray Tomblin is proposing to balance the budget by raising taxes on tobacco products, starting to tax phone usage and tapping into state reserves for a third time in three years.
Those increases need approval from the Republican-led Legislature — a group that’s far from keen on tax hikes, particularly in an election year. If lawmakers don’t accept those changes, they’ll have to find money elsewhere.
More cuts are also planned for the 2017 budget year, and no worker pay raises are factored in. Tomblin also proposes a third straight round of tapping state reserves; this time, $52 million for the 2016 budget year’s woes.
It’s ultimately up to lawmakers to pass a balanced budget, but Tomblin can eliminate or reduce individual spending items.
Here are some highlights of the details Tomblin’s budget officials released to reporters Wednesday.
BRUTAL BUDGET PICTURE
West Virginia’s coal industry is in a downward spiral, and a glut of natural gas has slashed the resource’s prices.
Those are two big problems for the Mountain State, which leans heavily on taxes paid by companies that unearth those resources. The downfall of severance taxes also is starting to make personal income and sales taxes drop.
Those issues add up to a projected $381 million budget gap this year and a $466 million gap for the 2017 fiscal year.
Tomblin is proposing a variety of changes to patch up the current budget and craft next year’s plan, and a lot of them need lawmakers on board.
TOBACCO, PHONE TAXES
Tomblin’s plan banks on raising the state’s tax on cigarettes, e-cigarettes and other tobacco products to generate $78 million annually, and potentially $18.9 million for the rest of the 2016 budget year if the change is effective April 1.
The 45-cent increase on cigarettes would bring the tax to $1 a pack. Other products, like snuff, would see their tax level grow from 7 to 12 percent. And e-cigarettes would see a new 7.5 cent tax per milliliter of nicotine fluid.
The governor is also asking for a tax change dealing with cell and landline phone users.
A telecommunications service tax would apply the 6 percent state sales tax on both phone calls and cellphone data usage. It would bring in $60 million for the 2017 budget and $10 million for the remainder of 2016 if lawmakers agree to make it effective April 1.
Revenue Secretary Bob Kiss said about 40 other states already have a similar tax.
WORKERS COMP PACKAGE
The state is inching closer to paying off a longstanding worker’s compensation debt, possibly by October or November, and Tomblin wants to retool a variety of taxes used to pay it off.
Another proposal by Tomblin would guarantee an extra severance tax on coal and natural gas would disappear by June 30 at the latest.
A variety of other taxes would remain and may be directed into the general pool of state money: a tax on timber, workers compensation policies, income tax and lottery money among them.
PUBLIC EMPLOYEE BENEFITS
Public employees and retirees are facing $120 million in cuts.
Kiss said $43 million in general revenue and other funds will cover 90 percent of the extra burden imposed by those cuts.