Senate Finance Story Archives - West Virginia Public Broadcasting

The $400 Million Projected Deficit: How W.Va. Got Here

During his first week in office, Gov. Patrick Morrisey delivered a picture of the state’s fiscal health in stark contrast to his predecessor’s projections of strength for the state.

“The state will have a projected deficit of approximately $400 million and that number is projected to rise more and more in the out years,” Morrisey said. “This is where we stand on day one.”

For the upcoming fiscal year, West Virginia’s budget is facing a turning point. After years of tax cuts, federal funds for many social services are set to expire – and the legislature will have to adapt to Morrisey’s new budget proposals.

In the time since, Morrisey has made it clear that his office sees these issues as “inherited” and structural from former Gov. Jim Justice – pointing to one-time funds used for large ongoing costs like Medicaid rather than finding consistent funding sources.

“I think it’s coming across as more dire sounding than it is,” Sen. Eric Tarr, R-Putnam, said.

Tarr is the outgoing Senate Finance Chair, having held the seat for three years. He says he has worked to create flat budgets with the legislature.

While Justice ceased providing six-year budget projections during his time in office – a practice Morrisey plans to bring back — Tarr worked with available legislative data to create revenue reports, within a margin of error.

Still, he says Justice’s priorities could diverge from the concrete realities of running the state.

“Governor Justice was a very big, big picture guy on going out and, you know, let’s tackle the biggest mountain we can find,” Tarr said. “And really, sometimes there wasn’t as much a plan for tackling that biggest mountain you could find, but that went at sometimes the sacrifice of having somebody who was who really had an operational knowledge of the agencies.”

While Tarr is cautiously optimistic about Morrisey approach, he says Morrisey’s plans to audit expenditures could still be difficult logistically.

In the meantime, Tarr says he expects job growth through past legislative funds designated to companies like Nucor to propel job growth in the state – but those just come a little later than expected in projections’ margin of error.

And incoming jobs will also mean an incoming demand for social services.

“If you have people who are coming in in order to go to work, they need childcare for their kids, in order to be able to get away from the house to go to work, rather than somebody having childcare and still sitting at home,” Tarr said.

But those services – like health care costs and investments in childcare – have always been in the push and pull of balancing the state budget with years of tax cuts.

Sean O’Leary is a senior policy analyst at the West Virginia Center on Budget & Policy. He says the state’s position with those social services, which often enable and attract workforce participation, is already weakened.

“The risk that you run when you make cuts to the services is that you make the state uncompetitive to our neighbors,” O’Leary said. “When it comes to public services, we already spend less per child on child care. We already spend less per student on (K-12) education. We already spend less on health care and Medicaid. That’s not good for the state.”

As for the promise of tax cuts, O’Leary said the state’s strategy for job growth has long been lagging.

“We’ve been down this path before, when we tried this under the Manchin administration by cutting the corporate net income tax, the business franchise tax, the parts of the income tax and the sales tax,” O’Leary said. “At the time, it was called the most pro-growth tax reform in the country, and it was supposed to create jobs. It was supposed to pay for itself. All these things ended up costing in 2015 when they were all fully in effect, cost about $425 million which you adjust for inflation, it’s about the size of the income tax cuts that we’ve recently passed. And since then, West Virginia has lagged the rest of the nation when it comes to job growth.”

And many federal funds, like Medicaid expansion, are no longer in play for the state budget as pandemic-era federal bills have lapsed. This lapse also comes amid questions about what President Donald Trump will preserve as he plans to reassess and cut trillions in federal program funding – Morrisey says almost half of the state’s overall budget currently comes from federal funds.

O’Leary says his analysis sees a need to preserve social programs – while passing legislation that thinks more expansively about the potential for taxes that would not be levied against most West Virginians directly.

“You know, we could keep the current income tax cuts and add new brackets on top, so that no one below $100,000 would would see their taxes increase and would still raise hundreds of millions of dollars,” O’Leary said. “Doing that, you know, almost closes our budget gap.”

The governor releases his annual budget proposal along with his state of the state on the first day of the legislative session. From there, it’s up to the state legislature, including new Senate leadership, to come up with a budget that both chambers can pass and the governor will sign.

State October Revenue Numbers Below Estimates

The state’s October revenue numbers are in, and they are below estimates.

The state shapes its budget, or what it spends, based on what the governor projects the state will make, known as its expected revenues.

For the month of October, the actual revenue numbers were down by around 4 percent. The state is nearly $14 million behind in estimated revenues for the fiscal year.

State revenues from Personal Income Tax and Severance Tax were down by more than $50 million but an increase in corporate tax and dividends on the state’s investments helped offset those reduced revenues.

Since 2022 the governor and the Legislature have reduced taxes by just over 27 percent. There is a trigger in place that could result in another 4 percent tax cut by the end of the current fiscal year.

The year-by-year surplus has plummeted from $1.8 billion in 2023, to $826 million in 2024, to a projected $80 million in 2025. That’s a nearly 95 percent decrease in the last three years in surplus money. Those monies are used to keep programs in need going, like most recently the state’s employees health insurance.

Foster Care Bill Nearing Passage After Senators Continue Tweaking Funding, Foster Childs’ Rights

A bill for foster care reform in the West Virginia Legislature was amended further Wednesday night, before it was sent to the full Senate for consideration.

The Senate Finance Committee voted 10-7 along party lines to pass an amended House Bill 4092, providing at least $4.9 million to the state Department of Health and Human Resources for foster care.

That replaces a line in the Senate Judiciary Committee’s version of the bill, which senators passed along to the Senate Finance Tuesday night, allocating at least $4 million to the DHHR.

The money in the bill is meant to help the DHHR implement a tiered system of direct payments to certified foster parents and kinship caregivers. In that tiered system, higher payments would go to families caring for foster children with severe emotional, behavioral or intellectual needs, and older children who the DHHR says are harder to place than younger children.

Before it reached the Senate, House Bill 4092 didn’t address how payments should differ according to the needs and age of a child. Instead, it simply increased the minimum level of direct payments to foster families from $600 a month to $900 a month, per child. The legislation also provided child-placing agencies with a minimum $75 daily per child, to help the agencies provide more services to foster families.

The DHHR estimated the financial implications of the House version would have cost the state $16.9 million total. As both chambers of the Legislature finalize a budget for 2021, the House still includes that $16.9 line item in its budget request. The Senate does not.

Both chambers’ budgets include another $14.9 million improvement package the DHHR requested earlier this year for social services. According to DHHR Deputy Secretary Jeremiah Samples, the department could implement a tiered payment system, as described in the Senate Finance version of the bill, using this money.

“A tiered model does allow us to build greater capacity than a flat increase,” Samples told senators Wednesday evening.

The DHHR currently is piloting a tiered system in a few West Virginia counties, where child placement agencies and families are paid according to three tiers. The highest tier is reserved for children with the most medical or behavioral needs.

If the DHHR were able to implement the tiered program statewide, Samples said, more families might house older children and kids with greater needs, who the state otherwise sends to expensive out-of-state institutions and group homes. Samples said of the roughly 7,000 children in foster care now, just under 500 have had to leave West Virginia.

“One of the biggest money-losers is … having to send our children out of state, pay[ing] a high price tag,” Sen. Tom Takubo, R-Kanawha, said in committee Wednesday. He suggested that the state would be able to use the money saved to implement the pay raises the House of Delegates called for with the monthly payment increases.

“We can do the same thing with less money,” Takubo said.

Democrats who ultimately voted against passing the Senate Finance version of the bill Wednesday said they wanted to reinstate the monthly payment increases, described in the original House bill.

Sen. William Ihlenfeld, D-Ohio, referred to testimony the committee heard earlier during its Wednesday meeting from Julia Kessler with the West Virginia Children’s Home Society.

“Our foster families do the hardest job in the system that we have,” Kessler said Wednesday night. “They take care of kids with the most difficult problems. We ask them to put their own personal lives aside … they really have the most stressful job of taking care of kids and learning how to deal with the behaviors and the trauma that they come into the home with.”

“We have trouble finding families who want to get involved in the foster care system,” Ihlenfeld said. “I don’t think the flexibility we’ve given to the DHHR in the past has worked. I think it’s time that we need to legislate a little bit. … I think sometimes we have to enforce our will upon agencies to make sure that problems get fixed.”

An amendment from Ihlenfeld to bring back the $900 monthly minimum to foster families failed along party lines.

The Senate Finance bill also maintains many of the changes the Senate Judiciary Committee made on Tuesday to a list of rights for foster parents and children.

The original House bill included 27 rights for children in the foster care system.

The Senate Finance bill downsized that to 21 rights, most notably excluding rights to receive confidential correspondence from biological parents and other family, to have social contacts outside the foster care system, to have storage space for private use, and to be free from unreasonable searches of personal belongings.

Senators agreed Wednesday to reinstate a right allowing foster children to maintain contact with former caregivers and other important adults, which had been removed from the House bill by the Senate Judiciary Committee on Tuesday.

There were 26 rights for foster parents and kinship caregivers in the original House Bill. Now there are 16. Senators on the Judiciary Committee said Tuesday night that was to mitigate any “cause of actions” those rights created for foster parents to sue the state for damages.

Regarding other legislative efforts dealing with foster care issues, the Senate agreed unanimously to pass House Bill 4415 for runaway and missing foster care children on Wednesday. House Bill 4094, elaborating on the responsibilities of a foster care ombudsman created last year, is slated to pass the Senate on Thursday.

Emily Allen is a Report for America corps member.

W.Va. Dept. of Commerce Requests More State Dollars

The West Virginia Department of Commerce gave the House and Senate Finance committees a presentation Monday morning to explore the state’s competitiveness in attracting businesses.

The Commerce department also asked for a significant increase in its funding. However, that request collided with the reality of the state’s dire budget situation.

The Joint Standing Committee on Finance met in the House Chamber for the Department of Commerce’s informational meeting. The presentation was part of Governor Jim Justice’s Save Our State plan to bring more business and jobs to West Virginia.

The presentation explored ways the state could improve its competitive standing by enhancing infrastructure, building up a stronger workforce, and identifying good site building locations. Presenters also said that so-called Right-to-Work legislation has been a positive factor in attracting some businesses to the state.

But the state’s Right-to-Work legislation has not been fully implemented in West Virginia yet. It’s been challenged in a court case, and deemed unconstitutional by a Kanawha County Judge. The case will likely be decided by the West Virginia Supreme Court.

The Department of Commerce Cabinet Secretary Woody Thrasher says that even though the state is facing a budget shortfall this year, it’s not the time to cut the Commerce Department.

“West Virginia is dead last, and the reason we’re dead last, is a variety of reasons, but relative to the Department of Commerce, it’s because we do not have the tools in our toolbox to attract business specifically, really good sites,” Thrasher said, “I think we’re doing a really good job on workforce training. I think we’ve got a great quality of life, but we are way behind everybody else when it comes to having sites ready.”

Thrasher told lawmakers the Department of Commerce would need at least $35 million in increased funding for improving the state’s business climate, attracting more industry, and for site readiness.

House Finance Vice-Chair Eric Householder, of Berkeley County, says he felt inspired by the presentation, but he says increasing the Department’s budget could be tough.

“Right now, it’s going to be extremely difficult,” Householder said, “Currently we fund Commerce roughly around $10 million a year. It’s a tough budget year, as we all know, and it’s going to be extremely difficult, but we’re gonna do what we can. You gotta keep in mind, we’re trying to get the best return on investment for taxpayers.”

Democratic Delegate Larry Rowe, of Kanawha County, is a member of the House Finance Committee. He says he feels the request from the Commerce Department is a reasonable goal to achieve.

“We’re spending $10 million, and little of that is going to programming, most is going to personnel and expenses, so what I’d like to see us do is define very clearly what that extra money would be for and where it’s going to be spent,” Rowe said.

During the presentation, Cabinet Secretary Thrasher mentioned that by the end of the summer, he and his team hope to rebrand the state by having the Department of Tourism join the Department of Commerce. He also noted how getting the state’s Community Colleges involved more heavily in training the workforce will also be key in getting more industry in the state.

Lawmakers Begin Digesting Executive Budget Proposal

Gov. Jim Justice has asked lawmakers to do a politically unpopular thing this state Legislative session — raise taxes. But legislative leaders say they are still on the hunt for cuts to state government. Both the House and Senate Finance committees held meetings Thursday and heard from the Governor’s budget team, who attempted to convince lawmakers to see things the governor’s way.

On Wednesday night, Gov. Jim Justice presented lawmakers with his plan to balance the 2018 budget. The latest estimates from state revenue officials show there’s a nearly $500 million budget gap in the upcoming fiscal year, and in short, Justice wants to close it by increasing taxes and making some minor cuts. His proposal would create $450 million in new taxes and cut government spending almost $27 million.

But during his State of the State Address, the Governor’s Office also released what they are calling an alternative budget — a list of government agencies that would have to be cut if lawmakers choose not to raise any taxes this session. Justice’s alternative budget would close colleges and universities, the Department of Veterans’ Assistance, and end most senior services, among many other things. That alternative plan concerned the Minority Chairman of House Finance Delegate Brent Boggs, D-Braxton.

“When we’re faced with this kind of a deficit, we can’t possibly cut state government to the point that we lose so many vital services for so many segments of our population,” Boggs explained, “so I think that he said that he’s open to other cuts, but I think to think that we can possibly cut $450 million out and not really make West Virginia a very difficult place to live and to work, I think he’s right on point.”

On only the second day of the legislative session, there’s quite a way to go before lawmakers put a final spending plan in place, but Boggs said he’s optimistic about Justice’s proposal.

“He’s giving us how it is,” Boggs noted, “I don’t think; it’s something that’s sometimes, the medicine’s kind of bitter to take, but I think the takeaway, we need to make sure we do right by the citizens of this state.”

Thursday morning, representatives of the state budget and the governor’s offices presented the governor’s plan in more detail — details House Finance Chairman Eric Nelson, R-Kanawha, said were not included in Justice’s State of the State Address.

So he said he and his colleagues are just scratching the surface of the proposal.

“I look at some of the positives that were out there, you know tourism in areas of the state; infrastructure, but you know, the devil’s in the details, and gosh our back’s are against the wall,” Nelson said, “and so we’ve got to work all the way around; find areas of compromise, and many of his secretaries have only been in their position two weeks, so let’s work through this.”

Thursday afternoon, across the rotunda — members of the Senate Finance Committee were given that same detailed presentation by the director of the State Budget Office, Mark McKown. He was asked about that alternative budget made up solely of cuts to government, first by Sen. Corey Palumbo, D-Kanawha.

“Was the point of this exercise to come up with the cuts that [would be the least harmful] or the most shocking?” Palumbo asked.

McKown said the Governor’s Office wanted to avoid cuts to public education and most Medicaid coverage while also keeping the state’s prisons and jails open, but otherwise, McKown said there isn’t much left in the budget to cut.

Senate Finance Chairman Mike Hall added his own thoughts.

“Obviously, to a lot of minds it would be unacceptable to do several of the things on here,” Hall said, “The question is, are there other things not on here that total up to a substantial amount of money and my belief is, having looked at the budget, there are not other things unless you go to the school aid formula or the Medicaid line.”

Hall said his Finance Committee will split into subgroups to dig through smaller sections of the budget to find additional places to cut. That work will begin after the committee hears from all of the state agencies during their budget presentations this month.