This story was originally published by Mountain State Spotlight. Get stories like this delivered to your email inbox once a week. subscribe to the free newsletter at https://mountainstatespotlight.org/newsletter
When Governor Jim Justice announced in September that he had poured hundreds of millions of dollars of federal pandemic aid into the West Virginia trust fund, he said it would result in a “massive cut” in operating costs.
But for many West Virginia businesses, the savings are small. While Justice’s move will result in a 25 percent cut in unemployment taxes, it translates into savings of less than $ 100 per employee for many companies.
“I don’t see this as massive at all,” said Michelle Jack, owner of Sweet-A-Licious, an ice cream parlor in Buckhannon. With only five employees besides her and her husband, she pays much less unemployment benefits than some larger companies, which means that savings are also much lower.
West Virginia received $ 1.25 billion from CARES in April 2020. The judiciary has sole control of the money, and its spending priorities have been questioned for more than a year by West Virginians, who say it did not use the funds to meet the immediate needs of the pandemic.
The governor gave more than a third of that money – $ 445 million – to WorkForce West Virginia, which oversees the Unemployment Trust Fund, though Justice kept most of that money until last month. The fund, into which the companies pay a tax on the salaries of their employees, pays the state unemployment benefit.
However, economic data shows how much federal funds are to be allocated to meet the urgent needs sparked by Covid-19. West Virginia now has significantly lower unemployment rates and significantly more money in the trust fund than it did before the pandemic. And as the coronavirus created and exacerbated economic and public health problems, the struggling West Virginians and some experts point out urgent needs that that money could instead have met.
“There will be a lot of companies that will be gone next year to take advantage of the (trust fund money),” said Jack. “Money is needed now to keep us afloat, not next year.”
“Expert financial advice”
In the early months of the pandemic, the future of West Virginia’s Unemployment Fund looked bleak.
The number of citizens reporting unemployment reached all-time highs, and each week far more was withdrawn from the fund than companies could contribute.
“The trust fund really needed something,” said Sean O’Leary, senior policy analyst with the West Virginia Center on Budget and Policy.
Jared Walczak, vice president of state projects for the tax foundation, said West Virginia is one of 11 states that now have more in their unemployment trust fund than it did before the pandemic.
“It is appropriate that states use the substantial resources made available to them by the federal government to replenish those funds so they can prepare for the inevitable next downturn,” he said.
Justice contributed nearly $ 40 million to the fund in the past fiscal year. Last month, he sent him an additional $ 405 million in CARES bills: $ 185 million to repay a federal loan raised to help boost unemployment benefits, and another $ 220 million to be added to the fund . A press release promoting the latest allotment claimed that it and its implications were an example of judicial conduct and “expert financial advice”.
But O’Leary said there was a difference between strengthening the trust fund to keep it from running out and replenishing it to cut taxes.
“If we put it in there because we have to pay these benefits out to those who are really at risk and really have problems, great,” he said. “If we do it in the future to cut taxes, it will probably be within the rules, but it is definitely not in the spirit of what the CARES law money was intended for.”
The trust fund should – in normal times – be financed entirely by the company’s tax revenue per employee. In the month leading up to the pandemic, West Virginia had $ 160 million in its unemployment benefit trust fund. In spring 2020, this record was upset by a record unemployment: More than 146,000 people registered as unemployed in April 2020.
But now unemployment claims are falling as the number of West Virginians who continue to apply for unemployment benefits has applied for half the pre-Covid-19 value. The trust fund’s level has swelled to almost double its pre-pandemic levels, with more than $ 300 million in the fund since last week, said Andy Malinoski, a spokesman for WorkForce West Virginia. According to the US Treasury Department, that is more than ever in the past decade. By increasing the trust fund to over $ 220 million, Justice sparked a 25 percent cut in business tax.
“It may not have been necessary, especially when we’re still in the middle of a pandemic and there are a lot of other things we don’t really address,” said O’Leary. “Smaller employers are unlikely to get much benefit from this.”
Wyatt Lilly, who owns Cheap Thrills Records businesses in Beckley and Princeton, has only three employees besides him. He said a 25 percent cut in that tax wouldn’t make much difference; In 2020, he added just $ 600 to the fund. That opinion was shared by Tammy Dotson, the owner of The Hatter’s Bookshop in Princeton who has no other staff.
“Hopefully it has helped a lot of small businesses,” said Dotson. “But as far as I’m concerned, it won’t do me any good.”
Roman Stauffer, Justice’s senior policy advisor, defended the move in a statement emailed.
“The repayment of our federal unemployment loan and the provision of additional funds for the state unemployment fund will help all workers now and in many years, not just with a single short-term small grant,” said Stauffer.
If the federal loan of $ 185 million had not been repaid by September 4, there would have been tax increases for companies, according to the governor’s press release.
Stauffer added that the judiciary had provided other direct aids to small businesses.
“When the Covid-19 pandemic shut our economy down, Governor Justice acted and allocated $ 140 million in CARES dollars for direct grants to small businesses,” he said.
Last year Justice launched a program that provides grants of up to $ 5,000 to small businesses through the CARES Act. But even though he said he set aside $ 150 million for this purpose, only $ 26 million was spent on the grants, according to the state auditor’s website. And business owners like Dotson and Renay Reed, owners of a store that sells homemade groceries and groceries in Williamson, say they didn’t find out about the opportunity until after the deadline.
Other Uses of CARES Act Funds
Delegate Kayla Young, D-Kanawha, said expanding or expanding the state’s small business grant program would have been more helpful than the tax cut.
“I think the best way to help companies is by giving them instant access to capital,” she said. “And it doesn’t do that in any way. It only slightly reduces what they put into the state unemployment fund if they can still stay in business. “
Young said there were other, larger, immediate needs to focus on during the pandemic.
“There is still an urgent need, especially with the advent of the delta variant,” she said. “People are being displaced. They need money for their utilities. You need money for everything. “
According to the state auditor’s website, the state still had $ 138,833,159 in CARES bill as of Monday. The deadline for the issue was originally the end of r2020; the US Congress later extended it to the end of 2021.
Some local governments, like Lewis County, have also told Mountain State Spotlight that the money from the CARES bill would help them cope with the recent surge in Covid-19 cases.
Jenna Gerry, senior attorney for the National Employment Law Project, said a better use of the money would be to extend unemployment benefits for those who lost them when the judiciary ended all federally funded pandemic unemployment compensation programs in June.
“I think (it’s best) to get the money straight to the workers who can use it for needs,” she said.
For small business owners like Michelle Jack from Sweet-A-Licious, the need is now.
After grappling with the initial surge in the pandemic for months, she is now struggling with the spread of the Delta variant in the mountainous state.
“You think your head hovers over water for a while while Covid is waning; Well, then here comes this Delta variant and (business) just tanks again, ”she said.
She still finds happiness in her ice cream parlor, but said it was much more difficult.
“Just the constant question, ‘Am I going to earn enough to pay the rent? When do I start making money? ‘”She said. “How long should I hold out?”
Jack said she received $ 5,000 through the state’s small business scholarship program, funded by the CARES Act, and it helped a lot. She said another, other than the tax cut, is a “lifeline” for many people – and keeping them in business now so that they can continue to pay taxes in the future.