State Budget Director Mike McKown apologized to lawmakers this week just before his briefing.  It was a sunny, pleasant autumnal day in the Mountain State, but McKown’s news about the state’s financial condition was gloomy.

According to McKown, the proposed state budget for next fiscal year (FY 2015, starting July 1, 2014) has a potential gap of at least $265 million.  That’s a huge number considering the general and lottery revenue portions of the state budget only total $4.5 billion.

By law, the state cannot have a budget deficit, therefore Governor Tomblin and lawmakers have to figure out ways to balance the budget.  Absent a surge in economic growth, which is not on the horizon, state leaders will have to cut spending, raise taxes or use a combination of both.

About 65 percent of state spending is written into state law—public education and Medicaid make up the largest shares—which means only 35 percent of the budget can be targeted.

Tomblin hasn’t said yet what he plans to do, but here are some possibilities.

The Governor has already asked state agencies to submit two budget plans; one holds the line on spending for next fiscal year while the other reduces spending by 7.5 percent.  If the Governor takes the cut, that will save about $80 million.

The long-term budget forecast for 2015, which was included in last year’s FY 2014 budget documents, includes a two percent pay raise for school teachers and public employees.  Eliminating that will save another $50 million.

The remaining $135 million could be made up by sweeping one-time money that is socked away in a variety of government and legislative accounts.  Additionally, Tomblin could dip into the Rainy Day emergency fund, which has $900 million.

Historically, the Governor has refused to open up the Rainy Day fund for fear it would trigger a run on the account by lawmakers anxious to find money for a variety of wants and needs. Additionally, the flush account helps maintain a high credit rating for the state, holding down interest rates on borrowed money.

Tomblin or legislators could also decide to raise taxes to offset the deficit, but that’s politically dangerous territory.  For Tomblin, an increase would be a retreat on his campaign promise of lower taxes.

State House Republicans oppose any tax increases. Some Democrats may be willing to get behind higher taxes—especially if it’s something like a tobacco tax increase—but that could be used against them in the next election.

Meanwhile, the pressure on the budget will grow more intense when the legislative session begins in January.  School teachers and public employees believe they are overdue for a raise and Senate President Jeff Kessler wants to set aside a portion of the growth in tax collections on the natural gas industry to create a fund for economic development or tax breaks in the future.

No wonder McKown gave lawmakers a warning Monday before he made his presentation.  Still, it could have been worse. The Budget Director could have also talked about FY 2016, where the state budget is expected to be at least another $200 million short.

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Comments

  • Concerned

    Elimination of food tax cost the state approx. 180 million. Not saying it shouldn't have gone away, but if you get rid of revenue from one area, when economy is already down, logic says you've got to fill the void.

    • susanf1218

      Yes, reinstate the food tax! It only saves individual families a pittance - $6 whole dollars on a $100 grocery bill -whoo boy! But collectively, 180 million dollars would go a long way toward helping to close the budget deficit WV faces. And I don't see the food tax as being regressive - I see it as fair - you eat, you pay the tax.

      • Cigarman

        Susan I agree. Sure the $6 is good to have but is hardly a "bite" out of most folks budget, and as stated there is $180 mil of the shortfall.

  • DWM

    Let me spin this in a different way than everyone is going. Certainly the news is dire and the near future not much better, but isn't it encouraging that at the end of the day we have people in Charleston that will have to figure out a way to balance our budget?

    Wouldn't it be great if Washington was under the same constraint?

  • Shadow

    Not one word on cutting back entitlements! The Holy Grail of Democrats.

    • GregG

      I'm all for cutting entitlements. First we cut all the subsidies, tax breaks and loopholes of big business and the rich. Then we will abolish the tax exempt status of the church, hospitals and all these other so-called "not for profit" groups.

      • Wowbagger

        GergG,

        You really need to read Peter Schweitzer's new book Extortion.

  • rick

    How did we not see this coming. Coal is once again going in the crapper. It has been replaced by cleaner fuels. China has recognized that coal power is killing it residents. They are cutting back on buying our coal and going to other sources of power. As long as the "Friends of Coal" run the governement...no matter which party is in office...we will be in a steady decline.

    • Wowbagger

      The big difference is that coal will not rebound this time.

      It's all over once the infrastructure is gone at this stage of coal field development.

    • The bookman

      Where do you get your facts...the information I have read is that China will continue to drive the world wide consumption of coal...accounting for two thirds of the projected growth..eventually using it to provide 1/2 of its electric supply by 2020, up from 1/3 today...their stated goal of reducing its reliance on coal and the reality of having no other available resource that is even remotely cost competitive has lead to this projection by the IEA just this month...in china even the laws of supply and demand and it's relevance to price matters...what is stunning is that the same realization has not been made here in the US...where we rely on coal for 40% of our electricity generation...we may have other options but we lack the available infrastructure to make it a short term reality

    • syd

      "China has recognized that coal power is killing it residents. They are cutting back on buying our coal and going to other sources of power."

      100% false. They will continue to buy as much coal as they can get their hands on.

    • liberty4all

      While domestic use may be decreasing, coal exports increased last year.

      • Wowbagger

        The US has limited port facilities and they are apparently operating at capacity. The Obama Administration is unlikely to approve additional shipping capacity as they would like to limit Chinese and Indian consumption.

  • Sobonya4wvHouse

    The Legislature, without my vote, passed a bill giving $100 million of subsidies to the 4 casinos to buy new slot machines ($10 million a year for 10 years). They could repeal that this session.

  • Wowbagger

    Let's see, agencies could eliminate all open positions and return the money to the state and declare Kessler's proposal to squirrel away current revenue dead on arrival. Then they could start really considering proposals to attract business instead of driving it away just across the state's borders.

    If Terry McAuliffe is elected in Virginia and starts raising taxes it would help in the long run.

    • liberty4all

      Topography drives businesses to neighboring states. That is why southwestern VA, eastern KY, central PA, western MD, and southeastern OH are not hot beds of economic development. Any development these neighbors experience are in parts of the state which are relatively flat and accessible thereby making the costs of site development that much lower.

      • Wowbagger

        Not exclusively. Topography is profitably overcome every day in West Virginia. That was the original intent of the variance of the Surface Mining and Reclamation Act of 1977 (SMCRA) allowing mountain top removal without a return to the original contour. I drove by a large flat area along US 19 just north of the the Cross Roads Mall on the north side of Beckley this afternoon. A coal around the Douglas horizon was stripped, the area was reclaimed leaving around 40 or 50 acres with utilities. It is immediately adjacent to I-68, I-79, and US 19 with I would judge at least 50,000 vehicles passing daily and maybe more. It has been available for lease or sale for at least 10 years, but to date there have been no takers. A similar area near little Fairchance, PA that has only been available for three or four years and has several businesses including an over the road truck dealer. The difference is Pennsylvania's business taxes and incentives, not flat land.

        The Boy Scouts made enough flat land for about 60,000 scouts and 10,000 staff at the new Bechtel Summit recently because Virginia didn't want them. I heard that from their Chief Scouting Officer (CEO) himself.

        BTW I have an undergraduate minor plus about twenty graduate hours in Geography courses and considered a Phd in Geography in the early 90's. I work with lidar and other analog and digital terrain data daily. Without further explanation suffice it to say I understand topography on many levels.

  • TD

    It's ALL about healthcare costs! The fed/state/county/local gov't are paying twice what they should have to to insure employees as is everyone else. Healthcare per citizen in the US is $7,100 while in the countries of the next 10 first world nations the cost averages $3,450, France on the high end at $3,650 and England on the low at $3,100.

    Two quick examples this year from my family how the healthcare industry is RIPPING US OFF!!! I cut my arm on a rusty nail a couple months ago and went to x-press care to get a tetanus shot. The charge for such a basic need which took less than 5 minutes? $170, which is at least twice if not 3 times what it should be.

    A much more egregious example, and we just received a bill from the hospital yesterday for the procedures done in January (who else operates like this?), my wife was diagnosed with Celiac disease earlier this year and the doc ordered an Upper GI plus a colonoscopy. My wife requested both be done at the same time but the hospital said they could not do that, had to be done as separate procedures. So there were two charges for prep room, operating room, recovery room, anastheologist, etc... I later found out my aunt, who is older and on Medicare, had both done at the same time because Medicare mandates it be done that way. This one incident alone cost PEIA thousands of extra dollars.

    Until we reign in the Healthcare industry there will NEVER be enough money in the budgets!

    • Joe

      Good cost stats TD. That's an amzing difference.

      Also, I certainly hope you both are feeling better.

      I just had to get a tetanus shot for something similar and had the same costs.

      Joe

    • The bookman

      TD you are right about identifying the problem, out of control health care costs...express care would not charge you $170 for the shot... Billed and collected are two different issues all together...state government has been projecting this shortfall for a very long time...as coal continues to be diminished by the Feds the "trickle down" consequences will continue to be amplified...coal severance collection is the leading indicator...falling income tax and sales tax collections are going to continue to contribute to the shortfall...the policies of the left, the policies you advocate, are a direct catalyst for what we now see unravelling before us... You now say trust our vision and solution for how to deal with health care costs through this new program that we can't afford...that you can't even properly implement, and I say by what track record have you and the left earned that trust...

      • TD

        Here's my suggestion on improving the healthcare cost problem and it's very simple and dooable. Put capitalistic pressures on the industry by requiring they post pricing online, that when you leave the doc office/emergency room/hospital you do so with a complete bill of sale. That you have a tracking number to follow the payment process.

        As I stated we received a bill yesterday for procedures my wife had done in January, we thought it was all taken care of.

        The big signs every gas station have up listing their price per gallon, they are mandated to do that. Same should be true of healthcare, then at least it would have some characteristics of capitalism. Every purchase we make the first thing 95% of the population does is check cost, EXCEPT in healthcare where you're in the dark the whole way.

        Coal taxes will dry up at some point, if not this year in a few more years, healthcare cost is our budget problem, not coal revenue.

        • The bookman

          Agreed on all of that...when I was younger and was uninsured we would actually do what you suggest...we would call providers prior to visit and get a firm price for services...remarkable the variance from dr. to dr and hospital to hospital...but if people really had to deal with the cost up front.. That would be a good start...

    • GregG

      Been there, done that TD. That is why I have never been a big supporter of the ACA. I believe the bigger issues of healthcare isn't that lack of individuals covered but the fact that the health industry has for years upon years had free reign to overcharge those that do/did have coverage. What is even more troubling to me is the amount of hospitals that hide behind a tax exempt status claiming to be "non-profit". Yea, right!! Sure looks like placing the word Saint in front of their name is pretty damn profitable.

    • Medman

      TD

    • Medman

      TD, If you think the economic problems in WV are all created by the cost of healthcare, you are grossly oversimplifying the cause of our problems. The examples of costs that you cite exist in every state and community in this country, but they are not all facing the huge deficits that are projected in WV for the next years. Healthcare costs must be addressed, but if we accepted your premise, I can assure that we would still have bad roads, bad schools and bad health-drug numbers. Removing the coal revenues and having no industry to replace it is almost tragic. If you do not have jobs and taxpayers, the cost of healthcare becomes a none issue.

      • TD

        My only point was the state budget Hoppy is talking about, as well as our federal budget, are being blown away by the healthcare industry that has an endless greed.

  • Sen. Joe Manchin not fighting for coal...

    The Severance Tax has proven to be a life-saver the past 20 plus years, but that is about to end with President Obama's war on coal. Of course, everyone knows that Joe Manchin spends his time on Fox News instead at the office of the President.

  • Concerned citizen

    Telemedecine and mobile health can save the medicare and medicaid tens of millions of dollars if utilized for common illness. Its definitely a viable option worth exploring

  • Hillbilly

    Whats New????????????????????in WV

  • susanf1218

    And once again, the state employees get left behind. No pay raises, again. But we have to take care of all the deadbeats who don't work and give them their Medicaid, now don't we??

    • Carl

      It's all about votes. Who brings in the most votes Medicaid people or state employees?

      • Wowbagger

        State employees need to realize that a lopsided one party system isn't in their best interest, then I imagine they could form a cohesive voting block and possibly change things.

        • The truth

          I think it is time to walk off the job and let the politicians run the government.

  • Medman

    At times it becomes overwhelming to think about the economic future of WV even for the most optimistic among us. The coal industry is dying and there appears to be no strategy in State government to diversify and find creative ways to offset the lost revenues. The daily headlines are dominated by drug driven crimes that are filling up the prisons. Education is near the bottom in every national measure. The highways are being held together with pothole patching. Sadly, we seem to be headed to third world status if we do not find some new leaders who are willing to change the way we manage this government.

    • GregG

      You make some great points Medman, but as one of my co-workers would say........"You can't make ice cream out of cow manure". I don't think anyone could turn this state around regardless of their politics. Years of allowing big coal, timber, oil and gas to come in and rape this state is now catching up with us. Oh well, I'm sure the likes of a Don Blankenship isn't suffering. That's all that matters, making the elite few comfortable.

  • CaptainQ

    Well Hoppy, looks like the Democratic Party Machine that has ran this state for nearly a century is sending out these 'urgent dispatches' to prepare the people for what West Virginia historically does best: raise/create taxes!

    Hopefully, Governor Tomblin and the rest of the 'Capitol Gang' did in the 90's when they came up with such short lived nonsense as the "Tree Tax" and the "Dog Tax." If I were to make a guess, I'd say this could signal the return of the dreaded 6% Food Tax. Its easy to impliment (since the system is already in place) and unless you live near a state border, it's unavoidable. Perhaps WV will also add a 'special' fuel tax that would go directly to Charleston instead of for highway upkeep.

    Bottom line, historically, there's two things Democrats in WV have done 'well', spend/waste our tax dollars and raise/create new taxes. Governor Joe Manchin was a welcome departure from this historic trend, and so far, Earl Ray Tomblin has done the same. However, 'old habits' die hard and it wouldn't surprise me to see our lawmakers in Charleston returning to their 'old ways' fairly quickly in the next few years. Maybe not in 2014 (since its an election year) but more than likely in 2015, get ready for more taxes, especially when the expenses involved in the ObamaCare law's expanded Medicaid hit.

    • GregG

      So where do you suggest the state come up with the $$ for the budget shortfall? I guess we could do something along the lines of King Danny User Fee Jones. We could charge a non-resident user fee on anyone traveling through WV. We could even charge them Buckeyes extra for continually driving in the passing lane at 65mph.

      • CaptainQ

        A WV User Fee? A tax just for living and breathing? Such a tax already exists according to the SCOTUS, it's called "ObamaCare!"

        So GregG, you think more speeders need to be brought to justice? That's already been tried too, just ask the residents of Summersville! How's THAT policy doing for their local economy? Even AAA Canada is telling their members to avoid driving through WV at all costs, all because of Summersville.

        No need to worry, GregG. When it comes to finding new and exciting ways to tax people, no one does it quite like WV Democrats!

        Let's see what they could tax next. Breathing fresh air (an Air Tax)? A Rock Tax? A Horse tax wouldn't work, people would just drive their horses to the border and set them free. Someone in Charleston already floated the idea of having an "Auto Parts Tax." A statewide User Fee is quite possible. Who knows?

        • GregG

          NON-RESIDENT user fee. See, even I was trying to give the residents of the state a break and still find a revenue source. Didn't say a word about "speeders". Geez Captain, you might want to have a cup of coffee and re-read my post.

          • CaptainQ

            Oops! My bad, GregG.

            Maybe I had TOO much coffee this morning.

            Anyway, non-resident user fees might be self defeating, discouraging tourism and travel.

            We need ALL the people we can get to come to the Mountain State and spend their 'disposable' income here. Might not be a good idea to give folks from other states/nations even more reasons to avoid coming to WV (aside from Canada's AAA warning about Summersville).

      • AX MAN

        HOW ABOUT REDUCING WELFARE PROGRAMS ????

  • AnxiousEER97

    The piece would be more insightful if it included an explanation of why the shortfall exists.

    • Joe

      Medicaid, reduction of coal severance taxes, no sgnificant statewide economic investment due to the lack of right-to-work laws, and the general significant costs involved in supporting a high percentage of uneducated, entitled centric population.

      • Hillbilly

        And higher MPG vehicles using less gas, therefore less gasoline tax revenue.

    • Hoppy Kercheval

      Anxious, good point. One reason is a slow down in coal severance tax collections. Another is an ill-conceived tax credit for flex-fuel vehicles that cost the state $100 million dollars.

      • MoMoney

        Who pushed this "ill-concieved tax credit" in the WV Legislature? Who sponsored the bill?? Who's committee put it on the House floor? We need answers before this next election. If they are responsible for a $100 million shortfall in revenues, they should be held accountable to their constituents. My best guesstimate is that it came out of the Judiciary Committee led by ultra liberal Democrat Carrie Webster, now a Kanawha County Judge.
        C'mon Hoppy, name names!!!!!!

  • Jeff Lewis

    Why isn't anyone talking about the one thing that would immediately bring more money to the state without raising taxes or cutting services?
    The state needs to legalize sports book wagering at the state casinos. It makes no sense that we have table games and live and simulcast betting at the casinos, but it's supposedly going too far to allow someone to place a bet on who is going to win a sporting event!
    This makes no sense to me while this hasn't already been done in West Virginia. We have lottery cafés in every vacant building in the state that doesn't make half the money it used to due to neighboring states allowing slot machines. We have every other type of gambling imagineable in this state except the one thing that would bring in millions of dollars in additional revenue.
    We don't even have the religious right protesting gambling anymore because it's already so prevalent. So will someone at the capital use some common sense and add the one thing that will bring in additional money without hurting the hard working citizens of this state for a change?

    • Bullman

      Couldnt of said it better myself

    • Jay

      I like this idea. When I lived in Texas, I remember seeing a billboard as I traveled through Louisiana. The billboard had a revenue dollar figure on it and simply read: "Thanks, Texas!" Gambling of many types is legal in Louisiana which is not in Texas. Therefore, Texans simply cross the state line and pour millions of dollars worth of revenue into Louisiana's coffers.

      • Joe

        Agree with your comments, guys. I would also add enacting right-to-work laws.

    • Fred

      Can't have sports betting. Federal law prohibits it. Look it up.

      • Jay

        Why is it not prohibited in Nevada and New Jersey?

    • ron "from morgantown"

      A federal law passed in 1992 known as PASPA prohibits sports betting in all but 4 states , Nevada , Montana , Oregon and Delaware . Delaware adopted" limited" sports betting a few years ago ( only parlays , no single bets allowed ) as a result of increased competition from Casinos from Pa. Interesting , as the law reads , West Va(or any other state) could have passed sports betting but had to do it before 1994 . New Jersey is currently fighting the 1992 law but hasn't had much success , losing several arguments in various Federal Courts .