In an effort to help close a growing budget deficit, West Virginia’s governor has ordered all state agencies to make spending cuts.
In November, Gov. Earl Ray Tomblin (D) announced plans to reduce all government agency spending by approximately 2 percent, or about $60 million. Since July 2016, state tax revenue has been $87.4 million below projections, prompting the spending cuts.
Strung Up in Red Tape
Garrett Ballengee, executive director of the Cardinal Institute, says state and federal regulations are causing West Virginia’s economy to wither away.
“There are several reasons why the economy is so stagnant and the shortfall is so pronounced,” Ballengee said. “The eighth-most highly regulated industry in the country plays an increasingly important role in our economy: oil and gas extraction. It is quite a burden on West Virginia’s natural-resource-intensive economy, in addition to the natural market forces surrounding energy production.”
Warming Up to Entrepreneurs
Ballengee says state tax and regulatory reform is becoming increasingly important for West Virginia’s survival.
“The state must be among the most business-friendly tax environments in the country, with a broad base and low rates,” Ballengee said. “When an individual wants to start a business in West Virginia, it must be among the easiest states in the country to do so.
Ballengee says restricting the size of government is necessary for the state’s economic recovery.
“The state government must not be allowed to grow in size and scope as West Virginia’s population shrinks and the burden of paying for government falls on fewer and fewer people,” Ballengee said. “A systematic review of the state government’s activities and agencies is also necessary to determine where excesses can be cut. West Virginia’s state government needs to be leaner and restrict its actions to the core areas of government.”
Addressing the Problem
Bob Williams, a senior fellow with State Budget Solutions, a project of the American Legislative Exchange Council’s Center for State Fiscal Reform, says Tomblin’s plan for cutting spending does not address the source of West Virginia’s problems.
“The governor’s 2 percent across-the-board cuts for state agencies hurts agencies that are well-managed and doesn’t really address the budget problem,” Williams said. “West Virginia collects more per capita, $2,910 in taxes, than its neighboring states. It also receives more federal aid per capita and spends more per capita.”
Williams says the state government’s problem is there are too many regulations.
“Raising taxes is not a viable option,” Williams said. “The problem is a lack of jobs, or jobs displaced by federal and state regulations.”