- Associated Press - Wednesday, May 6, 2015

Recent editorials from West Virginia newspapers:

May 6

Charleston (West Virginia) Daily Mail on tax reform:

The Joint Select Committee on Tax Reform did the best thing it could do Monday to start developing a tax reform plan for West Virginia. It listened.

The committee heard from representatives of the state’s revenue agency and two experts who were involved in previous tax reviews, reported the Daily Mail’s Joel Ebert.

“There’s the opportunity for tremendous good,” Revenue Secretary and former speaker of the House of Delegates Bob Kiss told the 16-member committee.

There was a time not that long ago when lawmakers couldn’t make West Virginia’s tax structure much worse. The state ranked at or near the bottom in terms of business tax atmosphere as recently as 2004 before achieving the middle of the pack in recent years.

According to the Tax Foundation’s 2014 Tax Climate Index, West Virginia ranks 23rd in overall rank.

“We are more midstream now certainly than we were 10 years ago,” Kiss said.

Referring to tax studies in 1999 and 2006 under Govs. Underwood and Manchin respectively, retired Marshall University professor Cal Kent said both tax commissions reached similar conclusions: the desire to create an efficient tax system that encourages economic growth and job creation and is competitive with other states.

Kent also stressed the need for the tax structure to be neutral: not favoring one business or individual at the expense of another - something that the current system using $75 million in tax credits for some but not others does not achieve.

Simplicity is another desired feature.

“We’ve taken a few steps backwards,” said Mike Caryl, who served on Underwood’s Commission on Fair Taxation. In 1991 West Virginia’s tax code was 900 pages. More than 700 pages have been added since.

“Simplicity is not something we can say we achieved,” Caryl said.

Committee co-chairman Eric Nelson, R-Kanawha, House Finance Chairman, said the committee will not rush to a conclusion.

“A timeline is the last thing we want to put on the table,” he said.

Rightly so. Listening to the experts and taking the time to create a tax system that is fair, simple and promotes economic growth will take time.




May 5

The Register-Herald, Beckley, West Virginia, on state tuition:

West Virginia University’s decision to raise in-state tuition by nearly 10 percent beginning this fall is, sadly, a trend that is all too common among universities in the United States.

WVU officials blamed the need for such an increase on losing state funding over the past few years as state lawmakers wrestle with their own budget shortfalls.

Over the past three fiscal years, WVU’s main campus and its two divisional campuses have seen state funding reduced by $24 million.

To be fair, state funding of higher education is the one revenue stream college administrators cannot control.

So they have to find another.

In 2011 - for the first time ever - tuition revenue surpassed state funding as a revenue source for U.S. colleges and universities.

Putting increased emphasis on tuition comes with a cost. As of 2014, total student debt owed in the United States reached an estimated $1.2 trillion. To put that into perspective, as a percentage of household debt, only mortgage debt is higher.

WVU President Gordon Gee, like the Board of Governors, is acutely aware of this trend and the impact it can have on students and their families.

Gee told MetroNews that WVU would increase need-based student aid and scholarships “to help ease this financial burden.”

Need-based student aid will increase by $2.25 million, and WVU will introduce a new “Dream First” campaign to raise $50 million for scholarships for WVU students.

The tuition hike at WVU still must be approved by the West Virginia Higher Education Policy Commission. It seems unlikely, given the losses of state funding, that the commission will reject WVU’s request for higher tuition rates.

It’s not just WVU that is feeling the effects of the state’s and the country’s weak economy. At Marshall University, administrators say they want to hold the line on tuition increases and are trying to craft a 2015-2016 budget that doesn’t include any.

They say they’re not sure how they’re going to do that.

So how far can universities go when placing bigger financial burdens on students?

Will there come a time when the cost of a college degree crosses the line, a point where the lifetime financial benefits that a degree has always provided no longer merit the high costs of college?

How far in debt should a student, and his or her family, go to get that degree?

We have been, and continue to be, strong advocates for higher education for our students in southern West Virginia.

At a time when we so desperately need to diversify the region’s economy, higher education remains a crucial part of that effort.

WVU ranks high nationally for the quality of its academic programs and the relatively low cost of tuition compared with other state flagship institutions.

Whether that continues will depend on WVU finding new ways to fund operations that aren’t based on student-generated revenue.




May 5

Herald-Dispatch, Huntington, West Virginia on water rates:

When West Virginia American Water announced that it was seeking a 28 percent increase in the rates it charges customers, many people’s first thoughts were that the utility must be attempting to recover costs stemming from the January 2014 chemical leak that disrupted water service to about 300,000 customers.

What else could explain such a hefty proposed increase in its rates?

But that’s not the case, the water company said. That will come in a separate rate request to the West Virginia Public Service Commission.

So what justifies the proposal that was filed last week?

In explaining the rate request, the company pointed to two primary reasons. One is that the company has made about $105 million in system improvements since 2012. The other is that the company plans to invest $98 million more in the system over the next two years. The proposed rate increase will yield the company about $35 million a year, it said in a news release.

The size of the rate request is problematic for several reasons, chief of which is the impact on the utility’s 550,000 customers in the Mountain State. If the request is approved, the average residential customer’s monthly water bill will go up by $11.63 from $41.27 to $52.90, or about $140 per year. That will put a squeeze on the pocketbooks of many low-income West Virginians.

Another concern is that the request is asking customers to front the company the money for nearly half of the cited infrastructure improvements, a strategy that hasn’t been present in previous rate cases, Jacqueline Roberts, director of the PSC’s Consumer Advocate Division, told the Charleston Daily Mail. “The water company has asked to be able to recover future costs that they have not yet expended,” she said. “The (Consumer Advocate Division) has historically opposed this kind of rate making because it’s speculative.”

It should continue to do so.

Also troublesome is the apparent opposite approaches taken by West Virginia American Water’s parent company, American Water Works Inc., regarding its investors and rate payers.

American Water, a publicly traded company, noted in its year-end report for 2014 that it had “strong financial performance” with revenue up 4.6 percent and its income from continuing operations up 16 percent. It also forecast an even better per-share performance in 2015.

Also of note is that American Water this spring announced a dividend increase of 3 cents per share, raising its quarterly dividend to investors to 34 cents. Over the last five years, American Water has raised its dividend to investors annually. The current dividend rate is 54 percent higher than it was in 2010, with the company’s most recent quarterly dividend payout to investors representing about $61 million.

American Water, of course, has operations in many states, with West Virginia being just one of them. But looking at the company’s overall strength and its continued generosity to shareholders, the question is obvious: Who is in better position to finance the bulk of infrastructure improvements - rate payers in the Mountain State or the company and its investors?

West Virginia American Water’s last rate request - granted in 2013 - initially was for 21 percent but pared to 7 percent in a settlement with the Public Service Commission. As it has in the past, the PSC should look very hard at this request, particularly the aspect of justifying a higher rate based on work that hasn’t been completed yet. It seems apparent that this latest request also should be trimmed substantially.



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