With coal and gas down, West Virginia faces budget quandary

By Jonathan Mattise, Associated Press

Long reliant on taxes from unearthing coal and — more recently — natural gas, West Virginia faces a budget quandary as its natural resource industries struggle and hardline legislative Republicans stand against raising taxes.

A miner works underground in the Sewell "R" coal mine in Yukon, W.Va. For the long-suffering communities that depend on coal, a recent Supreme Court ruling temporarily blocking greenhouse gas reductions was seen as a rare victory. But coal country residents say the reprieve may only be temporary as utilities turn away from coal generation and production continues to slide. (AP Photo/David Goldman, File)


CHARLESTON, W.Va. (AP) — Long reliant on taxes from unearthing coal and — more recently — natural gas, West Virginia faces a budget quandary as its natural resource industries struggle and hardline legislative Republicans stand against raising taxes.

The line drawn by House Republicans was apparent Thursday, when a budget committee killed Democratic Gov. Earl Ray Tomblin's plan to bring in new cash by raising taxes on cigarettes, tobacco products and e-cigarettes. Democrats also opposed the stripped-down bill that would have upped only the cigarette tax by 45 cents to $1, contending that it didn't go far enough.

"I wouldn't put a high probability on any new revenue measure right now, unfortunately," said Del. Eric Nelson, a Kanawha County Republican and House budget chairman. "We have a serious, serious structural imbalance with our budget."

Facing a $466 million 2017 budget gap, Tomblin and Republican legislative budget leaders agree that the state's tax system needs to rely on something more stable than constantly-fluctuating natural resources.

Lawmakers and the governor haven't come to terms on much more than that, though, as the 60-day legislative session nears its March 12 end. A special budget session will follow. Tomblin has the ability to strike out spending items, reduce them or veto the whole budget that the GOP-led Legislature passes.

Lawmakers still need to figure out how to cobble together $170 million for the next budget, Nelson said.

Without new money coming in, deeper cuts could loom.

At the House's request, state agencies spelled out possible effects of filling the gap with additional 6.5-percent cuts to most areas of government. Some include: closure of eight State Police detachments and 87 trooper layoffs; 350 jobs eliminated across colleges and universities and closure of at least four community college campuses; and layoffs of 166 workers at state hospitals.

"Obviously, it's not going to be a very pretty sight, considering I've already over the past three years cut 20 percent of our general revenue budget," Tomblin said.

Other energy states are feeling the budget sting.

Hampered by low oil prices, Alaska faces an estimated $3.5 billion budget gap. Republican Gov. Bill Walker's budget plan would institute the first income tax since 1980, hike business taxes largely on oil, gas, mining, fishing and tourism, and increase other levies. Alaska lawmakers have opted to focus on looking for cuts to state spending before deciding on any potential new or additional revenue.

Wyoming, the nation's leading coal-producing state, has reserves of $1.8 billion socked away in its "rainy day fund" from its energy windfall. Lawmakers there cleared a two-year budget tapping into $220 million from those reserves and cutting most state agencies by 1.5 percent.

West Virginia's coal severance tax dollars dropped by 26 percent in the first half of this budget year. Severance cash from natural gas — which has seen its prices dwindle — fell 40 percent.

Tomblin has taken a hard stance against using the Rainy Day Fund again. The state used $100 million from the reserves in 2014, $14.8 million last year and will use $51.8 million to patch up the back-end of this year's lagging budget. It's still well-stocked at $784 million.

Lawmakers didn't consider Tomblin's other tax increase proposal at all this year, which would have applied the 6-percent sales tax to cellphone and landline usage to yield $60 million annually. Then Thursday, Tomblin's prospect of raising $78 million through tobacco taxes all but wilted, even after the Senate passed a bigger tobacco tax hike worth $115 million.

House Republicans briefly mulled higher taxes on professional services, from lawyers to engineers, but killed the idea a couple days later.

The Senate also passed a $316 million tax hike to fund roadwork by raising everything from Department of Motor Vehicles fees to the sales tax, but that could face even more House opposition.

Still, lawmakers are mulling an even bigger tax break for coal and natural gas that could blow more than a $100 million hole in the budget, according to the Tomblin administration.

Tomblin signed $110 million in other tax breaks for the industries last month.

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