The Fayette Tribune, Oak Hill, W.Va.

Local News

February 3, 2014

Proposed Future Fund would create nest egg for West Virginia

— West Virginia is in the midst of a $143 million budget shortfall, and legislators are not only looking at a second year of 7.5 percent budget cuts and a hiring freeze, they’re also searching for sources of revenue.

For Senate President Jeff Kessler, D-Marshall, new revenue is not a tough fix. Kessler proposes creating a Future Fund, which would set aside 5 percent of the severance tax for oil and gas drilling. Had the Legislature done the same with the coal severance tax in 1975, Kessler estimates that the state would have $8 billion in reserves earning $800 million a year at 10 percent interest.

“We would be a completely different state today,” Kessler said. “What could we do with $800 million?”

For one thing, the state’s roads could all be paved in a two-year cycle instead of looking at finding an extra $1 billion the Division of Highways needs for road maintenance, Kessler said.

More importantly, a nest egg like that could ensure that “the state’s most precious resource” would not be lost, he said.

West Virginia spends about $100,000 per child to educate its students from elementary school through college, Kessler said. But once those students graduate from state schools, they tend to leave because of lack of employment opportunities.

“We should not be surprised that we’re 49th or 50th,” Kessler said. “Our best and brightest are gone.” He likened the loss of educated young people to a manufacturing company that discarded one of its products for every one it built.

Kessler said he is tired of the state’s constant low ranking. “It doesn’t have to be that way,” he said.

The Senate president said that just a few years ago, North Dakota was on the same path as West Virginia — losing population.

“Nobody wanted to go to North Dakota because there was no opportunity there,” he said. But because of the gas drilling business there, North Dakota became the fastest growing state, while West Virginia was one of only two states that lost population.

And North Dakota capitalized on the fossil fuel industry by setting aside some of the tax money it collected for a Legacy Fund. In 20 months, the state had $1.5 billion, more than the $900 million it took West Virginia 20 years to save in its Rainy Day Fund.

Kessler said the oil and gas industry can give West Virginia a  “second bite of the apple” if the Legislature will set a baseline percentage of the severance tax the industry already pays and invest it for future growth, for instance taking 25 percent of any collected severance tax revenue more than $100 million.

The first $100 million would operate the budget, he said.

“The beauty of this is I really think the [tax] estimates they have in their budgets are significantly low,” he said. “I think they will quadruple.”

And if it’s not that big, Kessler said the state hasn’t lost anything by making the effort. He doesn’t fault the lack of coal industry dollars in a future fund on the coal industry. He faults past lawmakers who didn’t have the vision to set aside a portion of that money.

“Coal was king,” he said. “But if coal was king, we haven’t been taking very good care of the subjects.”

In spite of the state’s wealth of natural resources, he said in many ways “we’re still the poorest state in the union.”

Counties once rich with coal production have been economically decimated when the coal ran out because their economies were not diversified before the resource was depleted.

“We need to create real wealth and opportunity for people and diversify our economy,” Kessler said.

“Instead of spending like drunken sailors, let’s put some of it away and in a few years we’ll have a nest egg. The future is now.”

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