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Statehouse beat: Budget gap to grow bigger

CHARLESTON W.Va. -- Quote of the week: "The problem is, we're living too long. You can't work for 35 years, and then retire for 40 years." -- state Budget Office director Mike McKown.

McKown made headlines last week when he told legislators they will be looking at an $80 million shortfall in the upcoming 2013-14 state budget, and that the gap is expected to grow to $260 million the following budget year.

Shortly afterward, the West Virginia Center on Budget and Policy declared the budget woes self-inflicted, noting the elimination of the sales tax on food, and cuts in the corporate net and business franchise taxes amount to about $316 million a year in lost tax collections.

(That's not surprising, since the WVCBP is funded, in part, by labor unions whose members would not be well served if the Legislature closes the gaps by cutting state government jobs, or cutting back on state contracts.)

However, WVCBP missed a bigger contributor to the budget gap, the $390 million a year the state has to put into the Teachers' Retirement Fund under a 40-year plan to pay down a $5.5 billion unfunded liability created when governors and Legislatures in the 1970s and early 1980s failed to adequately fund the pension system.

McKown noted that the annual payment for the sins of the past eats up almost 10 percent of the state's general revenue budget each year.

"If we didn't have that, we could really do a lot of things with $390 million," he said.

And that 40-year plan was only made possible by the infusion of about $807 million in tobacco settlement funds in 2007. (Thank you, Darrell McGraw ...) Without that, if memory serves, the contribution under the old pay-as-you-go plan would be getting up in the range of a budget-busting $600 million a year by now.

While West Virginia has tried to act responsibly to adequately fund pensions for teachers and state employees, the same can't be said for other states and municipalities, McKown said.

Detroit is filing for bankruptcy, in part because of massive pension deficits for city employees, he noted. Chicago has a $19 billion unfunded liability for municipal pensions, while the state of Illinois has a $96 billion liability and will exhaust its teacher pension fund within five years. (He didn't mention it, but California is in the same pension mess.)

McKown said the Legislature needs to take heed of those numbers, since at some point, the federal government will probably have to step in with some way to pay those pension obligations.

"U.S. citizens will probably be bailing all these pension funds out," he said.

As for the quote, McKown noted that when the concept of retirement benefits took off in the 1930s, the retirement age of 65 was selected, at a time when the average life expectancy for workers was 58, creating a system designed to avoid paying benefits to large numbers of employees.

***

Regarding last week's item about the oddity of Mayor Danny Jones calling a press conference on the omission of lobbyist Phil Reale's name from an arrest-list press release -- thus assuring Reale's arrest went from being unpublicized to the other extreme of being over-publicized -- the mayor sent a note saying, "I called a press conference because I judged [right or wrong] that the other press outlets would have called me about the story in the Daily Mail and wanted to get them all taken care of at one time."

Jones said he holds no personal or political vendetta toward Reale, stating, "I have no reason to wish ill will on Phil Reale, but he challenged the credibility of the administration and we felt we should respond, including [re-filing] charges if necessary."

(Reale had sent a pre-publication email to clients and colleagues which said, "As you might imagine, this is a trying set of circumstances for my family, my employees, and my friends. ... We ask at this time that you not draw conclusions from media reports that may contain politically motivated material.")

Jones said there was no political motivation on his part, pointing out that he supported Democratic Gov. Earl Ray Tomblin in the 2012 election, and assisted Tomblin in preparation for his statewide-televised debate against Republican Bill Maloney.

Meanwhile, as Kanawha County chief public defender George Castelle's op-ed piece eloquently pointed out, the whole idea of shaming arrestees with press releases and "perp walks" is something of a medieval conceit, not that far removed from public stocks designed to expose offenders to ridicule and humiliation.

***

Finally, back on the last day of the 2013 session, Sen. Truman Chafin, D-Mingo, temporarily killed a bill making it a misdemeanor for members of grand juries to disclose information about pending indictments by giving a cockamamie floor speech about how husbands and wives would end up going to jail for innocently discussing jury duty over dinner.

In retrospect, Chafin may have had more suspicions about that legislation and what was going on with Mingo Circuit Judge Michael Thornsbury than he could let on at the time ...

Reach Phil Kabler at philk@wvgazette.com or 304-348-1220.


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