Legislative Oversight And Revenue Shortfalls: Controversy Continues To Surround Justice’s CARES Act Plans
This story was originally published by Mountain State Spotlight. For more stories from Mountain State Spotlight, visit www.mountainstatespotlight.org.
So far, Gov. Jim Justice has been the sole authority spending the $1.25 billion West Virginia received in federal coronavirus relief.
Advocates have argued that he hasn’t spent enough of it to address the immediate needs of West Virginians facing the COVID-19 pandemic’s economic and health effects; he’s controversially pledged the largest portion of the money to the state’s unemployment trust fund, so that, down the line, businesses that typically fund unemployment benefits will pay less in taxes.
As of Monday, more than $660 million of that money from the federal CARES Act remains unspent, despite struggling West Virginians begging for economic aid. And lawmakers are rankled.
“Personally, I believe the money was intended to help businesses and our constituents get through the pandemic, and a lot of the money is still sitting in an account,” said Delegate Shannon Kimes, R-Wood. “The governor seems to like the idea of keeping a lot of this money the federal government sends our way into buckets.”
Justice has taken the wheel on the CARES Act money, citing emergency powers, even though the Legislature has the constitutional power of the purse. Kimes and other lawmakers believe there should be legislative oversight on such large amounts of future federal aid.
Kimes is the lead sponsor of House Bill 2014, which passed the House earlier this month with overwhelming support. The bill, pending in the Senate Finance Committee as of Friday afternoon, specifies the Legislature’s role in allocating federal funds, including when they come as relief for a public emergency like a pandemic. It would allow the governor discretion on spending up to $150 million of such federal funds, and would require monthly expenditure reports.
West Virginia is not the only state where the governor has solely controlled the CARES Act funds. But in many other states, including neighboring Pennsylvania, legislators have had some level of say in what to do with the money.
Kimes believes his bill’s language is agreeable to both the Senate and the governor. But the bill still has a long way to go. It must pass through both a Senate committee and the full chamber. It’ll also need to be signed by Justice; if the governor vetoes the bill, the Legislature would have to override it to get it enacted.
The American Rescue Plan vs. Justice’s plan
If the Legislature passed Kimes’ bill, it wouldn’t affect the CARES Act money Justice currently has, said House of Delegates spokeswoman Ann Ali. As for whether it would affect the $1.9 trillion American Rescue Plan that President Joe Biden signed into law on Thursday, Ali said it would depend on when the bill goes into effect.
But this is not the only potential limit on Justice’s spending of future money.
West Virginia will get billions in funding through the American Rescue Plan, including another $1.25 billion that goes directly to the state to spend. On top of this, $677 million will go directly to local governments in the state.
While the new plan allows that federal money to be used to fill revenue losses caused by COVID-19, it also includes a provision that has angered the governor: a restriction on using these new stimulus funds directly or indirectly to offset tax cuts.
The frustration goes back to Justice’s “buckets,” a term the governor uses to refer to allocating unspent money.
“I’m really big into buckets,” Justice said at his 2021 State of the State Address, when he first laid out his priority of reducing and eventually eliminating West Virginia’s income tax.
Over the last month, Justice has mentioned the idea of putting federal stimulus money in buckets to cover revenue shortfalls, as well as promoted a plan to get rid of West Virginia’s income tax. This has created some concerns that he may intend to use coronavirus stimulus money to cover the tax cuts.
The governor wants to reduce the state income tax by 60% in the first year the plan is enacted, and ultimately do away with it entirely. Revenue from the tax represents a whopping 43% of the state’s general revenue fund.
Justice blames U.S. Sen. Joe Manchin for the tax cut language in the new stimulus bill. Although he denies that he planned to use his “bucketed” money to offset tax cuts, Justice spent part of his Monday and Wednesday press briefings criticizing the Democratic senator and the provision.
“[Manchin] sent texts and memos to all of the Dems and everything around here that’s basically saying this: That I, Joe Manchin, put verbiage in the new stimulus law prohibiting anybody from getting any stimulus dollars, period, if they were going to use that in any way to lower taxes,” Justice said during the Wednesday press briefing. “In doing so, who’s really the loser? West Virginians.”
It’s not clear how the American Rescue Plan would unilaterally prohibit states from receiving stimulus funds, as Justice says, but saying the money can’t be used “indirectly” for tax cuts raises questions for some about whether this will prevent states from making any tax cuts.
During a Tuesday call with the media, Manchin said it would be a bad idea to consider a tax overhaul during a pandemic.
“I would just advise, whatever you’re going to do, postpone it for a while until you can see when the pandemic’s over,” he said. “Then make some decisions of what they’re talking about.”
Regarding Justice’s accusations, Manchin pointed to the fact that similar restrictions had been a part of past stimulus bills as well.
Sean O’Leary, senior policy analyst for the West Virginia Center on Budget and Policy, said it was a smart provision.
“You don’t want to be using a one-time temporary infusion of federal funding to pay for what would be an ongoing, permanent tax cut,” he said.
Justice’s tax plan was introduced in the House and Senate on Tuesday. Although Republicans say they support the idea of tax cuts in general, House Finance Chairman Eric Householder says Justice’s plan will likely undergo substantial changes. On Thursday, the West Virginia Business and Industry Council, a special interest group that represents a broad number of industries, expressed reservations over the plan, arguing many business owners won’t benefit while also seeing a rise in sales tax on their products.
Reach reporter Douglas Soule at email@example.com