CHARLESTON, W.Va. — When Gov. Jim Justice presents his budget strategy during tonight’s State of the State address, that will be the starter’s pistol for a 60-day session to accomplish some major financial feats.
West Virginia’s general fund — the main pot of money for the state budget — is just north of $4 billion.
The state budget gap for the next fiscal year is estimated to be about $500 million.
To cope with that problem, Justice’s staff said last week it’s preparing budget options of $390 to $606 million in cuts. The leaders of the Republican majorities in both houses of the Legislature have said they prefer major cuts — at least as a starting point — rather than imposing new taxes.
To accomplish that — to cut 10 percent or more out of the general fund — legislators are going to have to take unprecedented measures, including changing the laws that govern how some areas of government, like K-12 education, are organized and funded.
“Sixty-seven percent of that budget is already spent unless you pass a law,” said Senate Finance Chairman Mike Hall, R-Putnam.
He’s right.
Up to this point, major hunks of the general fund — $2.9 billion of the $4 billion — have been off-limits because they’re already spoken for by statute or they’re considered non-discretionary. The chart here visualizes, in millions of dollars, what a big piece of the pie has been off limits for legislators to this point.
One third of the pie is considered discretionary spending. That third funds areas like public health, safety and education and includes agencies like the state Division of Corrections, the State Police, Behavioral Health, Rehabilitation Services, Children’s Health Insurance Program, Schools for the Deaf ad the Blind and Higher Education.
The slimmest piece of discretionary spending up above — “Other” — refers to constitutional offices, administration, commerce, environment, the revenue department, transportation and veterans assistance.
All those are areas where legislators and the governor’s office can tinker relatively easily with spending allowances, although the politics of doing so could be a whole different story, especially if a program or agency is considered crucial by state residents.
Then there’s the other two thirds of the budget pie, accounting for areas current law hasn’t allowed state leaders to touch. Here’s how those areas stack up in millions of dollars.
The biggest area, education, includes state funding for schools, specified by the state School Aid Formula. Medicaid is the state’s share of the federal health program. The retirement funding is payments for pensions for former state workers, including judges, teachers, troopers, higher education employees and other state workers.
Coming up with a state budget that with cuts deep enough to fill the estimated gap won’t just require budgeting.
It will require changing state law to get into those areas that would really make a difference.
“It requires the Legislature to take action, not just to cut the budget,” Hall, the Senate finance chairman, said in a telephone interview. “But you’re cutting portions of the government where the expenditure is on statute. You’ll be voting on things, permanently changing them. That is the only way to get to $400 million. There isn’t any other way to do it.
“This is not just like going in and lowering a number. You’re going to change the way public education is funded. You’re going to change the way things are handled. These are going to be tough votes.”
The moving parts complicate budgeting. Hall singled out the biggest piece of the nondiscretionary pie, public education, as an example.
“The School Aid Formula requires $1.9 billion. If you’re going to propose a law that cuts that expenditure to $1.7 billion, do you put it in the budget document before you pass the law or put the cut in the document assuming the law will pass?”
Senate Minority Leader Roman Prezioso, D-Marion, serves on the Finance Committee and was chairman when his party was the majority. He thinks cuts of that degree of complication and magnitude could be darn near impossible.
“I can go through every line item, and you tell me where you can get $500 million,” Prezioso said. “I don’t know that you can.”
Overall, the general fund stacks up with public education and health and human services as the major areas of spending.
Those are areas where choices could be hard, even for the most fiscally-conscious legislators. Prezioso says he knows such cuts are hard from his experience when he was finance chairman.
“I was always trying to find ways to trim back,” he said. “We were beating up on the agencies and getting as much fluff as we can.”
He discussed higher education as an area where you could cut the entire spending area to meet the budget goal, but you’d make significant sacrifices.
Prezioso doesn’t favor that. He was having trouble imagining how it would even work.
“Is that feasible? I don’t know that it is,” Prezioso said. “I don’t know if these colleges and universities can make it if we don’t give them some money to get going. You can eliminate Promise (about $47.5 million in annual scholarships providing tuition to West Virginia students). You want to do that? I don’t think we do. We want more people going to college.”
The Division of Health and Human Resources is another large area for potential cuts, usually budgeted for just over $1 billion.
“So, out of one thing, are you going to take $500 million out? Cut it in half?” Prezioso asked. “I’m not against making cuts, but I think we have to be very careful about where we cut.”
Cuts in DHHR could focus on programs such as the intellectual and disabled waiver program which affects about 5,000 families, or the aged and disabled waiver program, which provides services for about 2,000 people statewide, said Eric Nelson, the House finance chairman. Nelson said he isn’t necessarily advocating for those specific cuts, just using them as an example of where legislators might look.
“If people really want to cut, the IDD and AD waiver programs cost about $150 million in state money, but they touch a lot of people,” Nelson said.
“There are a number of individual programs within DHHR that have state money and federal matches that may or may not be required to be offered to the citizens of West Virginia. That would be one of these areas that would probably be on the table if people want to cut their way out of this.”
House Speaker Tim Armstead, R-Kanawha, said during a broad-ranging discussion last week with reporters that he’s fully aware that cutting won’t be easy.
“We cannot continue to simply carve off little parts of the budget and say we can’t touch those,” Armstead said. “When we’re looking at a roughly $4 billion general revenue budget, you cannot make the cuts that are necessary if you carve off DHHR and education. You can’t do it. We’re going to have to look at those areas.”
He added: “We’re going to dig into areas we haven’t dug into before.”
At least for now, Armstead believes the state’s education and health and human resources functions could be subject to cuts that wouldn’t be detrimental. For instance, he said if cuts to public education also come with more increased autonomy for local school systems, educators should be able to make do with less funding.
“If superintendents have that flexibility, they can live with less without causing harm to our education system,” Armstead said.
“The same with DHHR. I’ve had a brief conversation with our new DHHR secretary (Bill Crouch); they’re looking very carefully at duplication, areas they can work with less.”
Pressure will be on the Legislature to come up with solutions because lawmakers absorbed widespread criticism for having to go into a special session lasting almost a month to resolve the past fiscal year’s budget.
But pressure will also be on Justice, who was critical of the handling of those problems during his campaign for governor.
In a short conversation Friday evening, the governor himself said areas like education won’t be off the table. But he said some of the budget ideas he presents today will be innovative — and he acknowledged that some will be painful.
“I think it’s going to be a combination of a lot of different things. It’s going to be a lot of innovative things as far as our education and our education departments and our education in general being the centerpiece of what I’ve said all along that we really need to be,” Justice said. “It’s going to be job creation beyond belief. It’s going to be instantaneous, the ability to instantaneously grow.
“But it’s going to be sprinkled with… there’s going to be a level of a little bit of hurt. Anything that is wasteful and counterproductive needs to go. We all know that. We all know that.”
Justice said many of the easy decisions were already made earlier as the state grappled with his budget.
“The easy, wasteful stuff we’ve already taken advantage of too. The low-hanging fruit is gone,” the governor said. “So, you know, there you are. At some point in time you’re starting to really cut deep into the bone. And when you do that, you’ve got to really be careful or you’ll slow the engine so much that you’re going to die. There’s absolutely no easy choices.”