Applause, please. As other state governments face insolvency and credit downgrades, West Virginia finds itself in a somewhat enviable position. Although our revenues are down, our credit rating remains strong at AA+ and insolvency need not be a real threat. Getting to this position was no easy task. According to FitchRating, West Virginia earned this AA+ rating due to it’s “focused and disciplined efforts to address its accumulated financial challenges, proactive approach to addressing long-term liabilities, and maintenance of sizable reserve balances.” In other words, we are good and reliable money managers.
So what’s the next step? With our financial house still in relatively good order, aren’t we ready for something better? Aren’t we ready for a long overdue journey – one that takes our state government and the vast majority of West Virginians to a level of prosperity that has eluded us for generations? Aren’t we ready for a level of prosperity that provides our state with opportunities and living standards that match or exceed those in most of the U.S.A.?
But our budget’s too tight. As our state’s budget process gets underway, citizens are receiving a sizable dose of gloom and doom from a variety of sources. We’re hearing about declining revenues (some accurate, some not), especially from gaming and coal severance sources. We’re hearing even more about living within our means, responsible cutbacks, irresponsible cutbacks, making painful choices, eliminating wasteful spending, tax hikes, even tax cuts. Under these circumstances, how can we possibly create a healthy environment for general and lasting prosperity?
Mouse in the house. In our state, we are constitutionally required to balance the budget. Yet, with state worker salaries and state services so marginally funded, there is little or no room for cutting expenses, at least without cutting to the bone. Put another way, cutting expenses has only a mouse-sized potential for balancing the budget. So we must look elsewhere. But where?
Revenue, the elephant in the room. About 72 percent of all revenue for our general fund comes from the consumer sales tax (29 percent) and personal income tax (43 percent). The remainder comes from the severance tax (10 percent) plus 23 other taxes (18 percent).
Although revenues from the severance tax were up this year, declines in the consumer sales tax, personal income tax, corporate income tax and lottery taxes have created a serious financial problem for our state, a problem that will only get worse until we get serious about increasing wages, incomes, and retail sales in West Virginia.
A final thought. The bulk of tax revenue for our general fund comes directly or indirectly from middle- and low-income West Virginians and from small business, so forget about increasing tax rates. They can’t afford it and won’t stand for it.
— Bill Yearout writes from Martinsburg