Senate Finance Committee members unanimously approved a 45-cent increase in cigarette taxes Tuesday - after rejecting a $1-a-pack hike on a party line 9-8 vote.
Proponents of sticking with the 45-cent increase proposed in the Gov. Earl Ray Tomblin's tobacco tax bill (SB 1005) argued that is the maximum amount of tax that can pass the House of Delegates in the special session.
"I would love to have a dollar increase in the cigarette tax, but I know it can't happen," Senate Majority Leader Mitch Carmichael, R-Jackson, argued. "I know we can get a 45-cent tobacco tax increase and it will do good."
Sen. Chris Walters, R-Putnam, concurred, noting, "A vote for a dollar this time will be almost certain death for the tobacco tax when it gets to the House. That's the reality of where we're at: 45 keeps it alive."
A 45-cent increase, to $1 a pack, along with comparable increases in wholesale taxes on other tobacco products, and a new tax on e-cigarette liquids, would raise about $78 million a year in new revenue.
That would reduce the 2016-17 budget shortfall from $270 million to about $192 million.
Proponents of the $1-a-pack increase amendment offered by Sen. Roman Prezioso, D-Marion, noted that the higher tax would raise another $44 million a year to help lower the budget deficit.
Senate Minority Leader Jeff Kessler, D-Marshall, said the Senate should push for the higher tax, since two other tax increase proposals submitted by the governor - eliminating the state's sales tax exemption for telecommunications services and an increase of up to 1 percent in the consumer sales tax - appear doomed.
"Given that I'm the only sponsor on the other two bills, I suspect this is the only revenue measure we're going to see," Kessler said, referring to Senate President Bill Cole, R-Mercer, removing his name as co-sponsor of the governor's tax bills.
Kessler said forcing state agencies to make $192 million in spending cuts, "will hurt significantly the quality of life for the people of West Virginia."
Referring to the audience in the committee room, he said, "I guarantee you, there's a roomful of people out here representing health clinics, universities, police departments . . ."
Prezioso argued that a $1 increase would be a "home run all around," increasing revenue and also being a more effective deterrent against smoking. He said the Senate should advance the $1 increase as a starting point for negotiations with the House.
"Is this just a lack of leadership in the House?" he asked, adding, "Are they dictating to the Senate: This is the way it's going to be?"
During the regular session, a cigarette tax increase was soundly rejected in the House Finance Committee - and more than one-fourth of the 100 House members have signed Grover Norquist's no-new-taxes pledge.
Prezioso said he's heard rumors indicating that the House has a razor-thin 51 votes in favor of a 45-cent tax.
The $1 increase amendment was rejected on a 9-8 roll-call vote. Sen. Tom Takubo, R-Kanawha, a pulmonary physician, paused for an extended period before casting the decisive "no" vote.
While advancing the 45-cent increase, the Finance Committee unanimously approved an amendment from Sen. John Unger, D-Berkley, dedicating $43 million of the new tax revenue to cover employer premium increases for the Public Employees Insurance Agency.
That would put into law promises legislators on both sides of the aisle have made to fund the premium increase - which would eliminate the need to cut PEIA benefits by more than $120 million next year through higher co-pays, deductibles and out-of-pocket maximum payments.
"There's been a lot of rhetoric, a lot of talk. I keep hearing people say, 'It's in the budget,' " Unger said.
While the amendment would make PEIA whole only for the upcoming year - PEIA Executive Director Ted Cheatham told senators that health care inflation rates will increase PEIA expenses by $50 million to $60 million each year - Senate Finance Chairman Mike Hall, R-Putnam, said it increases the likelihood that House members will support the cigarette tax bill.
"I think they will, with the PEIA amendment," he said.
Also Tuesday, during the second day of the special session:
n Senate Finance advanced a supplemental appropriations bill to provide $63.8 million to help close the funding shortfall in the current state budget (SB 1002). Among other funds, the supplemental takes $29 million from the state's Rainy Day emergency reserve funds, making a total of $95.6 million taken out of the Rainy Day funds to help balance the 2015-16 budget.
n House Finance Committee members spent much of the day questioning state agency heads about funds in various special revenue accounts.
n A pair of House floor speeches typified the difference of opinion on the budget shortfall.
Delegate Patrick Lane, R-Kanawha, said it is unfathomable to ask taxpayers for more money in the midst of a recession, saying the Legislature should focus on "right-sizing" state government.
"It's up to us to make the hard choices: What are we willing to cut?" he asked.
However, Delegate Jim Morgan, D-Cabell, said the state should be investing in education, health care and better roads.
"I can't believe we can make these cuts and not hurt the people who are hurting the most," he said, adding, "I don't believe we can move forward without serious revenue enhancements."
Morgan also suggested the ongoing budget impasse could be hurting delegates' chances for re-election in November.
"I assume some of you will get re-elected," he said. "After this, I'm not sure what will happen."
Reach Phil Kabler at philk@wvgazettemail.com, 304-348-1220 or follow @PhilKabler on Twitter.