BRADENTON, Fla. – Saying West Virginia's lawmakers have failed so far to solve the state's $500 million budget gap, Gov. Jim Justice proposed new initiatives that include taxing sugary sodas, cigarettes, and wealthy state residents.
Justice, a Democrat, said Monday that even though the Republican-led General Assembly criticized his first budget proposal, outlined in his State of the State address Feb. 8, they have yet to offer any alternatives after being in session for 20 days.
"We've got to get to rock-solid solutions and put people in West Virginia to where we can get out of this mess," the governor said, calling his revised plan another pathway to a balanced budget "with less pain."
Justice said he would amend to his original fiscal 2018 spending proposal to include a 1-cent per ounce sugary drink tax, raising $85 million, and a 50-cent per pack tax on tobacco to raise $47.8 million to "promote better health."
He will also propose a tax increase on "wealthy West Virginians" with incomes between $200,000 and $1 million to bring in $8 million of revenue, as well as "smoothing" annual contributions to the State Teachers' Retirement System to save nearly $41 million, he said.
Justice plans to decrease his original 0.2% business tax proposal to 0.0075% to generate $80.4 million, and trim his proposed 6.5% sales tax increase to 6.25% to bring in $46.5 million of new revenue.
With those and other measures, the state could end 2018 with a $63 million surplus, he said.
Justice said he would also revise his transportation plan to help grow the state's economy with 48,000 new jobs.
He will propose an increase in the state gas tax by 4.5 cents per gallon, instead of the original 10 cents per gallon, and raising West Virginia Turnpike tolls, targeting out-of-state vehicles, in part to support his $2.8 billion bond financing program.
Senate President Mitch Carmichael, R-Jackson, and House Speaker Tim Armstead, R-Kanawha, said in a joint statement that they would consider the governor's alternatives as well as their own.
"Like the governor, we agree we need to think big to solve our budget crisis," they said. "The Legislature has started work on major tax reform proposals that will spur economic growth.
One tax reform proposal being considered is Senate Bill 335, which would eliminate the state's personal income tax and repeal state use and taxes, replacing them with a flat 8% "consumption tax" on most sales and leases.
Justice said he agreed with the goal of SB 335, but now isn't the time to move it forward.
"If we were stable, I would be 100% behind it," he said, referring to the state's budget imbalance. "To jump to that is so phenomenally risky today it's just not even possible."
Last week, Moody's Investors Service downgraded West Virginia's general obligation bond ratings to Aa2 from Aa1, citing the state's multiyear structural budget imbalance.
With similar concerns, S&P Global Ratings downgraded its GO ratings to AA-minus from AA in April 2016, and Fitch Ratings lowered its GO ratings to AA from AA-plus in September.
