January 2018 Legislative Update

The West Virginia Legislature is set to convene on January 10, 2018, per the West Virginia Constitutional requirement that the “regular session shall commence on the second Wednesday of January each year.” W. Va. Const. art. VI, § 18. The West Virginia Constitution provides that the regular legislative session shall “not exceed sixty calendar days,” meaning that the session will conclude sine die at Midnight on March 10, 2018. W. Va. Const. art. VI, §22. The session may be extended by proclamation of the Governor for the limited purpose of passing a budget. However, Legislators are openly declaring that they will pass a budget in the 60 day regular session.

A. The Legislature

There are several initiatives which are anticipated to lead the legislative agenda:

I. Multiple legislators in both houses are on record as wanting to reform West Virginia’s business and inventory tax. Only seven other states tax business inventory, so Senate Finance Chairman Craig Blair wants to place West Virginia in the mainstream on this issue. Senator Blair has hired Robin Capehart, former Secretary of Tax and Revenue under Governor Cecil Underwood. One of Capehart’s capstone achievements as tax and revenue secretary was a tax study which found that eliminating the state’s business inventory tax could spur economic growth.

II. Senator Greg Boso is on record as stating that he wants to introduce a proposal to authorize a state-wide constitutional referendum which would limit the authority of the State Board of Education and the state superintendent. Boso’s goal is to ensure that no county board of education is usurped in its authority by unelected bureaucrats at the state level.

III. Many legislators have discussed the idea of breaking up the West Virginia Department of Health and Human Resources into separate divisions, returning the Department to its previous structure. Advocates of changing the Department feel that the Department is too large and unwieldy and cannot be properly managed. The notion is that breaking up the Department will lead to enhanced services and less “red tape.”  Governor Justice’s office remains skeptical of the idea

IV. Potential Medicaid cuts are and always will be an issue given the amount of money in the program (roughly $3 billion) and the amount of matching federal dollars which flow to the state. The federal match is about 3-1, so for every dollar cut from Medicaid, legislators are actually cutting four dollars which fuel West Virginia’s health care economy.

B. Elections

“For the 2018 election cycle,” the West Virginia Secretary of State’s website notes, “candidates must file a Certification of Announcement during the following period: Monday, January 8, 2018 through midnight on Saturday, January 27, 2018.”  The primary election will be May 8, and the general election will be Nov. 6. With all 100 House members and 17 of 34 Senators up for reelection in 2018, a sluggish start to the session is anticipated. Legislators are slow to take up controversial matters until they have a full understanding of potential opposition in their home districts.

C. The Executive

The landscape from last session has changed dramatically despite the fact that no election has occurred. Governor Jim Justice famously switched his party affiliation from Democrat to Republican last August. Governor Justice “cleaned house,” removing Democrat members of his administration and replacing them with Republicans. Notable additions to Governor Justice’s team include Chief of Staff Mike Hall, a long-time member of the legislature and immediate past Senate Finance Chairman. Ann Urling, a former VP at Summit Financial, serves as Governor Justice’s Deputy Chief of Staff. Both Hall and Urling have a high degree of financial wherewithal, with Hall knowing the intricacies of West Virginia state government as well as anybody.

In addition, Governor Justice’s road bond initiative passed last October. Over the next 5 years, $800 million in highway projects will be completed with revenue from the sale of general obligation bonds. West Virginia’s bridges and roads are in need of TLC, with the increased economic activity stemming from the highway projects providing an additional benefit above and beyond improved infrastructure.

With Governor Justice’s party switch and new staff, legislators are expecting a more realistic budget proposal from the Governor as opposed to the $450 million tax increase he proposed at the start of last year’s session. No one presently contemplates a special session arising, with members of House leadership, particularly House Finance Chairman Eric Nelson, stating that they want to have a budget passed and to Governor Justice before the close of the 60 day session.

D. The Economy

As a general proposition, West Virginia’s economy is improving. This is good news for legislators as increased coal, oil, and natural gas severance tax collections should mean that the budget picture will be better than years prior. Governor Justice continues to tout a group of Chinese investors who have indicated they will pump $84 billion into West Virginia’s economy over the next 20 years as these investors seek to tap into the state’s substantial natural gas reserves. With power plants globally turning towards “cleaner” fuel than coal, the proposed Chinese investment promises to help West Virginia’s infrastructure and China’s natural gas supply.

Secretary of Revenue David Hardy told the Joint Committee on Finance in November he is encouraged about the state budget “without being too optimistic.” As of November, the state’s $1.3 billion budget was only about $8 million below projections. Last year at this time, it was $80 million below projections. Legislative leaders have publicly stated that no tax increases will pass this session.

E. Conclusion

The legislature is expected to begin with a slow start, but things will heat up after the January 27, 2018 candidacy filing deadline. We will keep you apprised of developments as they occur.

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