Recently, The Dominion Post Editorial Board met with Kelly Allen from the West Virginia Center on Budget and Policy, and she taught us a few things about how the state’s budget works (or, as is sometimes the case, doesn’t work).
Unlike many other states, the governor of West Virginia has the constitutional power to set the state’s budget for the coming fiscal year, which is based on its revenue estimates. It is up to the governor’s office to set the “size of the pie,” or the total dollar amount. The Legislature then decides how that money gets divvied up for the year. Legislators can technically go over the governor’s budget, but they must increase revenue in order to do so, which would mean increasing taxes — something they are hesitant to do. Instead, legislators have worked around flat budgets in the past by allocating one-time funds from the “surplus,” which is any revenue that comes in over the governor’s estimates for the prior fiscal year.
The last several years, Gov. Justice and his office have kept revenue estimates artificially low. When the state brings in more money than the low-ball estimate, that money becomes the surpluses that Justice likes to brag about.
Those artificially low revenue estimates justify Justice’s flat budgets. By constantly predicting not enough money coming in, Justice can continue to set flat budgets for the coming fiscal year instead of raising the budget to meet both real incoming revenue and inflation. This makes it look like he’s constantly saving the state money, but he’s actually chronically underfunding many of the state’s agencies and other taxpayer funded services.
So how has this played out in real life?
It means that there’s never enough money for everything West Virginians want, even if those things have legislative support. Take for example the crises in our jails and emergency services. In the last legislative session, lawmakers were able to provide one-time funds in the forms of bonuses to help address staffing and resource shortages. They had to allocate that money from the surplus, but the surplus can only be used for one-offs. Because of Justice’s very low, flat budgets, lawmakers can’t pass consistent, long-term funding for either without generating new revenue from somewhere. There’s not enough of the “pie” left after funding the essentials from the budget.
Justice’s flat budget — combined with unusually high severance taxes and one-time federal dollars — created the supposed surplus that gave tax-cut fanatics the excuse to reduce income taxes. Which is about to come back and bite us in the fiscal butt.
Between the roughly $900 million in lost tax revenue (from lower severance taxes and income taxes) and the roughly $900 million in oncoming costs (including Hope Scholarship expansion, Third Grade Success Act, increased state share of Medicaid costs and more), last fiscal year’s $1.8 billion surplus is already spent. To make matters worse, Justice’s flat budget for this fiscal year is $600 million less than last year, when adjusted for inflation.
In other words, there’s a very good chance we’re about to hit a financial crisis in West Virginia. It will undoubtably be the Legislature’s fault for cutting long-term tax revenue based on temporary excesses, but Justice shares more of the blame than many may have realized. Unfortunately, he’ll be out of office by the time we truly feel its effects, so he’ll likely escape culpability.
For the Center on Budget and Policy’s brief on the 2023 flat budget, visit https://tinyurl.com/flatbudget.
