Legislative leaders on both sides of the aisle are reacting to Gov. Jim Justice’s announcement Tuesday that the state’s bond rating had been downgraded by the third national rating agency in a year.
Moody’s dropped the state’s rating from AA1 to AA2.
Senate Minority Leader Roman Prezioso is a former Finance Chair and explained Wednesday, the bond rating is like a credit score. When the rating is high, the state gets a low interest rate on long-term loans it takes out for expensive projects, like building highways or expanding public water lines.
“But as our bond rating lowers, the interest rate goes up, so it puts a lot of infrastructure projects in jeopardy,” he said.
It affects the current budget to a degree, Prezioso said, but it has a larger impact on future ones.
Even after the announcement, though, and the warning by Moody’s to find a long-term solution to the state’s continually imbalanced budget, Republican legislative leaders are sticking to the guns on cutting government and avoiding tax increases.
In a written statement Wednesday, Speaker Armstead said the downgrade reinforces the need for fundamental changes to how government operates and that the tax-and-spend policies of the past won’t solve the problem.
“There are things that we can do in this legislative session that can reverse that trend, that will put us on a path of growth and prosperity and those are the things that we are intent on pursuing,” Senate President Mitch Carmichael said Wednesday.
Things like reducing the size of government and creating a business climate that incentivizes growth.
“The bond agencies don’t care how much government you have, it’s your ability to pay for it,” Prezioso said, adding he only sees one solution.
“The situation that we’re in now, it almost mandates that to stabilize this economy, we need a revenue source and that’s about the only way you can do it,” he said.
But that’s something lawmakers in recent years have been unwilling to do, and not just under Republican control. Democratic Sen. Corey Palumbo said in a floor speech Wednesday the tax-and-spend policies Speaker Armstead referred to haven’t been implemented in his 15 years in the Legislature.
“That’s not been the way of the Legislature,” he told his fellow Senators. “We’ve increased the tobacco tax twice in the last 20 years that I can recall and that’s been the only tax increase that we’ve passed in this Legislature.”
State budget officials have predicted a nearly $500 million budget gap in the 2018 fiscal year, but Republican Sen. Craig Blair said that gap in is the governor’s version of the budget, a budget that’s built on increased spending supported by tax increases.
“He’s brought before us the largest budget that we’ve ever had. He’s also brought before us the largest tax increase that we’ve ever had,” he said during a floor speech Wednesday, “and I can tell you right now, my vote is not going to be part of that.”
That’s why Senate leaders, like Finance Chair Mike Hall, say they’re handling the budget differently this year.
Hall’s committee is meeting with individual agency heads to find potential cuts and efficiencies and instead of building a budget based on the money the governor predicts the state will have in 2018, they’re building it off of the revenues the state actually brought in in 2017.
“We know roughly how much money we took in last year and how much we have to spend,” Carmichael said. “We want to build a budget document around that.”
Only after they have that spending document complete, Carmichael said, will his chamber look to any potential tax increases. Carmichael expects the Senate’s budget document will be completed around the halfway mark of the session.