CHARLESTON, W.Va. — Given recent years of West Virginia budget woes, a primer for Gov. Jim Justice’s current budget priorities provides an unexpected conclusion: “The 6-year plan shows budget surpluses for each out year.”
This is a turnaround, indeed.
For lawmakers who are now, unfortunately, accustomed to needing extra months to work out a budget for the state, the new budget picture is requiring some adjustment — and scrutiny.
State revenue just turned the corner from red to black, but Governor Jim Justice and his staff have projected optimism over what’s possible this year and over the next few.
“My concern continues to be does a few months of some positive numbers put us in position to where we can do a lot of things we’re talking about doing and have the confidence going forward?” asked Delegate Brent Boggs, the ranking Democrat on the House Finance Committee, during a meeting this past week.
Justice: from ‘We’re dying’ to ‘Good ideas are working.’
Last year, when Justice proposed his first budget, he described West Virginia’s economic situation as if the state were nearly dead on an operating table. “We’re dying. We may already be dead,” Justice said.
Every year, the governor’s top budget officials give presentations to the finance committees in the House and Senate.
During the presentation in House Finance last year, state Budget Director Mike McKown described unpleasant meetings among the governor’s staff leading up to the budget’s formulation. “There was a lot of agony in those meetings,” McKown said then.
A six-year outlook for West Virginia’s budget picture — the one that looks promising now — particularly impressed the state’s circumstances on Justice, McKown said last year. “This opened his eyes.”
The governor’s grand finale at last week’s State of the State address was the revelation of a whiteboard with a graphic depiction of the state’s revised six-year plan. Every year was in the black.
That night, Justice described the change as a miracle.
“I thought a lot about what’s happened in the last 12 months,” the told the crowd at the Capitol. “And to be perfectly honest, you or other people that are listening to me, you can’t fathom what the level of miracle has been. Now, you can’t fathom how dire it was. And you can’t imagine how promising it looks.”
The governor went on to describe divine intervention.
“But I oftentimes said to myself: Well, you know, how can it be? You know, I feel like I came up with some pretty decent ideas. Big ideas. It’s kind of what I do. But at the same time — I truly mean this — I’m not capable of the ideas that I presented to you. I truly, truly give credit to the good Lord every single day for any and all.”
He again described a miraculous change of circumstances last week during an appearance on MetroNews’ “Talkline,” dismissing the suggestion that international market conditions — such as a cyclone in Australia that affected met coal supplies — have been the overriding factor in state revenue improvements.
Instead, the governor cited planning and foresight.
“It’s just mindboggling,” the governor said. “I am an optimist, but I deal in logic and I deal in fact. I walked in and they handed me a set of books. $200 million short, $500 million short. ‘And governor, we drained Rainy Day where we can’t take more out of Rainy Day.’ That’s what I had.
“Now I don’t know how it got any more difficult than that.”
The governor proposed an ambitious set of tax increases, most of which were ultimately rejected by the Republican majorities in the Legislature.
Last week, he said he didn’t want to raise taxes but felt the state needed to get through somehow until an economic turnaround could kick in.
“What I tried to propose is, I am adamantly against taxes. But you had to bridge ourselves to get to these good ideas where these good ideas are working. You had to be able to do that without cutting into the bone. Lo and behold, those ideas really have started to work.”
Immediate questions
Skepticism was the first reaction among Democrats after the Governor’s State of the State speech.
House Minority Leader Tim Miley and Senate Minority Leader Roman Prezioso said after so many months of budget challenges, it’s difficult to believe the outlook could turn on a dime.
Prezioso, a Democrat from Marion County who also serves on Senate Finance, questioned whether the millions of dollars in new spending priorities described by the governor could be accomplished realistically.
“Looking at the 6-year plan, there’s not enough growth in the six-year plan to cover all the things he wants to do,” Prezioso said after the State of the State.
Prezioso went on to say, “My question to him would be, What happened in the last 11 months that turned the state around? What were the initiatives that brought additional revenue into the state? His cornerstone program was his roads program and that hasn’t been started.
“So what happened in the last 11 months that got him from the point of a deficit budget to right now $3 million over estimate. The only thing that appears to me is they cut their way to balance the budget.”
So what’s the difference?
The governor’s budget officials say there are several factors in easing the financial picture.
They say West Virginia’s economy has been in growth mode since the second half of 2016.
In particular, foreign exports — particularly of met and steam coal — have been up significantly during that period. Coal production is also up, not from its height but back to about 90 million tons last year. Natural gas prices, after being suppressed by a glut, have surged up, thanks in part to blasts of cold weather.
The West Virginia unemployment rate has trended downward, and there’s been some improvement in employment and wage growth, leading to more taxes being paid.
The trends of the past year have led the governor’s budget staff to conclude West Virginia has turned a corner.
“The last three or four years of budgets have really been a struggle,” McKown told lawmakers this past week. “We have a good feeling about the ’19 budget.”
McKown said the difficult experiences of the past few years may make budgeting easier for the next few.
“What has helped us to get to this point is over the last four or five years, we were holding and cutting agencies, we continued to make our retirement payments. When you do that and hold the growth of expenditures,you eventually get to a point — that’s where we are — it’s starting to pay off now,” McKown said.
“You can add some money to the budget because things are starting to grow.”
Under examination
Finance committees in the House and Senate started running down the numbers in the governor’s budget last week. They also looked at the numbers that could be contributing to the improved economic picture.
House Finance Chairman Eric Nelson, speaking between meetings, said the past few years have been marked by a critical look at the state’s expenses.
Now, Nelson said, lawmakers will have to adjust and cast a critical eye toward the revenue figures.
“Historically, over the last 3 years, we’ve looked at the expense side of the equation. There will be just as much review of the revenue side going forward,” said Nelson, R-Kanawha.
“Year to date, we’re up over $100 million from last year. The governor did bump up revenue estimates in last year’s budget right at the end. Some of that’s starting to play out. Will it continue with the same trends? We’ll just have to look at that. Are we out of the trough? Absolutely. But how much are we springing out of the trough?”
More questions remain
Boggs, the Democrat from Braxton County, said he needs to take a closer look at the numbers before settling on whether he can trust them over the long haul.
“I’m always happy to get good news for the citizens of the state, I am very cautious about such a quick turnaround in thinking,” Boggs said.
He concluded, “I just am not convinced at this point that some found money and some rosy predictions put us in the category of having some kind of economic recovery in this state. We really need to move cautiously to get all the answers we possibly can before we commit ourselves to something we need to go back a year or two from now and retract or wish we’d been more had been more cautious.”