West Virginia Budget Rejected

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BRADENTON, Fla. - West Virginia is closer to a state government shutdown after Gov. Earl Ray Tomblin vetoed the fiscal 2017 state budget.

Tomblin was critical of the spending plan in a veto message sent to lawmakers Wednesday afternoon.

He said it maintained structural imbalance and unwisely dipped into reserves needed for emergencies and to protect the state's credit.

"The rainy day fund is a tool to help the state weather the unanticipated revenue shortfalls that occur from time to time [and] its principal balance should not be invaded to any great degree to backfill a budget that is structurally unsound for lack of revenue," Tomblin wrote.

"It would be reckless and irresponsible to deplete substantially our rainy day fund and jeopardize our bond ratings simply because we wish to avoid or delay taking necessary action to enhance revenues," he said.

Tomlin said a government shutdown is looming if a compromise is not reached.

Fiscal 2017 begins on July 1. West Virginia does not have a process for enacting a continuing resolution that would enable the state to run without an approved budget.

The Legislature sent Tomblin a $4 billion general fund budget on June 2 that closed a $270 million deficit with $182 million in reserves, fund sweeps, spending cuts, and $292 million in one-time sources of money for recurring expenses.

Lawmakers also rejected the governor's revenue-raising proposals such as increasing sales and cigarette taxes.

House Speaker Tim Armstead, R-Kanawha, said in a statement that Tomblin knew that lawmakers had no appetite for increasing taxes.

"The governor was presented a balanced budget passed by a majority of the people's elected representatives," Armstead said. "He has chosen to reject that budget and, in doing so, bears the responsibility to not only put forward an alternative but to work to gain support within his own party to pass it."

In addition to rejecting revenue enhancements, Tomblin said the Legislature's proposed budget would have exposed the state to $380 million in deficits in 2018 and 2019, further exacerbating the imbalance.

"While I'm disappointed in the governor's decision, I understand and respect his desire to maintain a healthy balance in the state's rainy day fund and why that would lead him to veto the Legislature's proposed budget," said Senate President Bill Cole, R-Mercer Cole. "In order to avoid a government shutdown, it is time to put the partisan politics aside and work together to pass Gov. Tomblin's proposal."

Tomblin urged lawmakers to return to Charleston immediately to resume work on a compromise to avoid a government shutdown.

As a coal-producing state, analysts have said state revenues have declined because of the global reduction in demand for mineral and ore products, which in turn have taken a toll on employment.

S&P Global Ratings downgraded the state's general obligation bonds to AA-minus from AA in April, citing challenges facing the state because of structural economic changes related to the energy sector.

Fitch Ratings assigns an AA-plus to the GO debt, while Moody's Investors Service assigns Aa1 ratings.

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