CHARLESTON, W.Va. — Gov. Earl Ray Tomblin delivered the annual State of the State address Wednesday night at the Capitol, putting the best face possible on West Virginia’s challenging financial condition.
“This is a year of tough financial choices for our state,” Tomblin said. “Our budget is strained.”
But the governor, claiming that raising teacher salaries is a priority, included in his budget a modest 2-percent raise for school teachers and service workers, along with a $504 raise for state employees. Beyond that, the budget either holds the line or cuts spending in state government.
It’s the first across-the-board raise for teachers in three years, although they receive small annual increases based on their years of service.
“We must invest in our future—sow the seeds for tomorrow—and invest in our children and those called to public service,” Tomblin told a joint session of the House of Delegates and the Senate.
The governor’s financial team had to use a creative combination of cuts and one-time dollars, including a dip into the state’s Rainy Day fund, to fill a $265 million projected gap and balance the $4.7 billion budget for fiscal year 2015.
State Tax and Revenue Secretary Bob Kiss called the budget “austere” during a budget briefing earlier in the day.
“The next couple of years going forward are going to be tight,” said Kiss, who added that the state isn’t projecting budget surpluses until 2018 and 2019.
The increasing costs of social service programs are causing the biggest challenges in the budget.
Medicaid, the healthcare program for the poor that is funded with state and federal dollars, will cost the state nearly $663 million next year, an increase of $87 million. All of social service spending is increasing $127 million to $1.2 billion. Officials pointed out the rise in Medicaid spending is not linked to Obamacare, which calls for the federal government to, in the near term, pay the entire cost of additional Medicaid patients.
The administration covers the increases, in part, by taking $84 million out of the Rainy Day fund. It’s the first time the state has used any of the reserve fund, which contains $920 million, to pay for ongoing expenses.
Kiss, a former House Speaker and Finance Chair, said leaders reluctantly opened the fund to balance the budget, even though they fear future administrations and legislatures could be tempted to use it more. “It could be a slippery slope,” Kiss said.
The governor proposes sweeping various state accounts for more than $60 million and reducing state spending by $70 million to cover most of the rest of the shortfall. Another $70 million in savings comes from budget cuts.
The budget reduces spending in state agencies-excluding Medicaid, public education, corrections and other essential services-by $70 million. Most remaining state agencies will see cuts of 7.5 percent. Higher education will be cut by 3.75 percent.
The tight budget is a reflection not only of the higher costs for Medicaid and the $41 million price tag of the teacher pay raise, but also the continued struggles of coal. The state’s leading industry has seen a drop in demand and price as utilities have turned more to natural gas. Additionally, mining exports have declined.
Still, state budget officials point to some optimistic signs. Payroll employment has reached a new high of 775,000 and is growing and real GDP growth was the eighth-highest in the nation between 2007 and 2012.
Highlights/notes from the speech:
—Tomblin carried a gardening theme throughout his speech, saying “Governing, like planting, takes planning, patience and foresight. We will cultivate a better future for all West Virginians,” he said.
—He said the cracker plant planned for Wood County could mean 10,000 construction jobs.
—He called on the state Board of Education to implement an A-through-F grading system for schools. “This rating system will provide a better indicator of school wide achievement,” Tomblin said.
—He introduced Marshall football coach Doc Holliday and congratulated him on the Military Bowl victory.
—Tomblin said he’s learned “how incredibly important it is to to be a good steward of the people’s money.”
—He encouraged young West Virginians to “stay in school, stay off drugs, apply yourself and find your passion. The jobs will be here for you.” He also invited “those who have left the Mountain State (to) come home … to take advantage of the growing opportunities we are creating for you.”