House Finance Committee throws wrench in Justice spending bills

CHARLESTON -- The West Virginia House of Delegates may have postponed some of the plans included in more than $720 million worth of bills in this week's special session called by Gov. Jim Justice.

The House Finance Committee met all day Monday and as its first action, it did not recommend for passage House Bill 101, which would combine the totals of the state's two revenue shortfall funds, known together as the Rainy Day Fund, when determining how much they receive from available surplus tax collections at the end of a fiscal year.

Justice called the Legislature into special session Sunday, with both the House and the Senate convening later that evening. Justice included 44 bills on the special session call, many of which are supplemental appropriations.

The state ended fiscal year 2023 with $6.5 billion for the general revenue fund, leaving $1.8 billion in surplus tax collections. Of that, $1.165 billion in one-time funding placed in the surplus section in the back of the fiscal year 2024 budget was paid out. Another $231 million was to be deposited in the state's Rainy Day Fund. That would have left the state with $451 million in tax revenue surplus for supplemental appropriations.

According to the West Virginia Budget Office, both revenue shortfall funds have a combined $882.6 million. At one point, the Rainy Day Fund exceeded $1 billion, though the fund has seen decreases due to investments.

"Last time I checked on the balance of the Rainy Day Fund, it fluctuates a lot," Dave Hardy, secretary of the Department of Revenue, said.

"In the past fiscal year, it's fluctuated quite a bit because of investment markets and things of that nature. It was right at $980 million," he said. "So, we're close to $1 billion. At one point, we were over a billion just based on the performance of the investments."

HB 101, similar to Senate Bill 1001 passed Sunday night by the Senate with no discussion, would retroactively change the formula used when determining how much of end-of-fiscal-year surplus to deposit into the Rainy Day Fund. Current law, updated in 2022, requires surplus dollars be deposited into the Rainy Day Fund no later than 60 days after the end of a fiscal year to keep the funds topped off at 20% of the total general revenue fund collections for the previous fiscal year.

The new formula in HB 101 and SB 1001 would require that surplus tax revenue be deposited into the Rainy Day Fund based on a rolling average of the preceding seven fiscal years equal or greater than 23% of that rolling average. Based on the proposed formula, instead of depositing $231 million into the Rainy Day Fund by the end of August, the state would only have to deposit $87.5 million, giving the state another $143.5 million in surplus collections for supplemental appropriations.

"I believe that we have one of the top 10 most safe rainy day funds for the operating budget of our state of any state in the country," Delegate Daniel Linville, R-Cabell, said. "As a result of that, I think that we can meet our obligations and if you look at this stack of supplementals...the most fiscally prudent thing to do would be to free up these dollars and reduce future outgo with some of these one-time appropriations."

While some support was expressed, the voice vote went loudly against with bipartisan opposition to changing the Rainy Day Fund deposit formula.

"Quite frankly, I'm a little incensed," said House Finance Committee Vice Chairman John Hardy, R-Berkeley. "I think that it's dangerous for us to continue to change the structure of our Rainy Day Fund. It puts a little bit of uncertainty into the agencies who rate us and who watch us and oversee us. I also think that the seven years is a very long look-back period and that period should at least be shortened."

"I think that changing the structure of this after we just did it last year is not a good idea," said Delegate Larry Rowe, D-Kanawha. "I think that we should take a deep breath. This is the interim period. We can take care of this in (regular) session and I think that's the appropriate place for it."

After the vote, committee members asked what the vote would mean for some of the dozens of supplemental appropriations bills up for consideration. One bill up for consideration after the vote on HB101, a $12 million supplemental appropriation for the Department of Revenue, was tabled. While some bills would be funded through the available tax revenue surplus, House Finance Committee Chairman Vernon Criss, R-Wood, said other bills may have to be amended.