Gov. Jim Justice has been banking on federal relief dollars to fill an estimated $500 million West Virginia budget gap, but new guidance from the U.S. Department of Treasury says the money can’t be used that way.
“Funds may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the statute,” wrote the treasury department.
No worries, Justice said today.
“We feel like this is still a real possibility for us to backfill the lost revenue dollars,” Justice said during a news briefing, suggesting Congress will eventually make the money available to states.
“I feel real confident that this is going to work out and work out in our favor.”
The treasury department guidance applies to $150 billion in aid to states under the Coronavirus Aid, Relief, and Economic Security Act.
West Virginia’s portion is $1.25 billion, and Justice says it is already on hand.
Governors around the country have been asking for the flexibility to use the money not just for direct costs but also for the indirect budget effects of dealing with the virus.
The treasury department concludes the money is meant for expenses directly related to responding to the pandemic, as well as “second-order effects” such as providing relief for those suffering from unemployment or business interruptions.
“Although a broad range of uses is allowed, revenue replacement is not a permissible use of Fund payments.”
Coronavirus Relief Fund Guidance for State Territorial Local and Tribal Governments (Text)
West Virginia revenue officials have described an estimated $500 million budget gap, which would represent a little more than a tenth of the state’s $4.6 billion general revenue fund.
Much of that, about $300 million, was caused by the state’s delayed income tax filing to July 15, after the current fiscal year ends.
The rest, an estimated $200 million, is the anticipated result of the severe economic slowdown caused by the coronavirus pandemic, pushing down personal income tax and consumer sales tax collections.
Justice has been counting on federal relief dollars to bridge the gap.
Today when asked about the possibility of furloughs, cuts or the use of reserves, Justice said there will be no need.
“If you’re saying ‘Wouldn’t the prudent thing be to just make cuts or lay people off?’ — well, it sure wouldn’t be very prudent if I was one of the ones getting laid off,” Justice said in response to a question.
“And it sure wouldn’t be very prudent if in fact what we did was did that and then had to change course in two to three weeks. We’re going to know every one of these details in two to three weeks from today. And we’re going to have all the time in the world from there to the end of our fiscal year to do what’s necessary that has to be done.”
Governors from around the country have been asking for more flexibility to use the already-allocated money, as well as an additional $500 million to stay afloat.
The National Governors Association renewed a request on Tuesday for additional help in a letter from the co-chairmen, Maryland Gov. Larry Hogan, a Republican, and New York Gov. Andrew Cuomo, a Democrat.
“Many states are already reporting precipitous declines in revenues that fund state services in health care, education, public safety, transportation, and other vital programs,” they wrote.
“States and local governments need robust support from the federal government as we navigate the response to this pandemic and to help foster the economic recovery that is ahead.”
In widely-discussed comments made on a national radio program this week, Senate Majority Leader Mitch McConnell, R-Ky., suggested states should opt for bankruptcy rather than being bailed out.
McConnell focused his concern on the large pension costs some states have built up.
“My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that,” McConnell said. “That’s not something I’m going to be in favor of.”
House Speaker Nancy Pelosi, D-Calif., suggests a major package of state aid is likely to be in the next round of federal relief legislation.
“In terms of state and local, the president himself has even said — and he tweeted out — that he’s ready to do state and local,” Pelosi told Bloomberg.
….to State/Local Governments for lost revenues from COVID 19, much needed Infrastructure Investments for Bridges, Tunnels, Broadband, Tax Incentives for Restaurants, Entertainment, Sports, and Payroll Tax Cuts to increase Economic Growth.
— Donald J. Trump (@realDonaldTrump) April 21, 2020
Justice, speaking at today’s news conference in West Virginia, said he is confident the money will be available.
“Absolutely, I believe, that we’re going to be just fine as far as being able to weather this storm,” he said.
Delegate Mick Bates, D-Raleigh, said the state should use the federal money already on hand — not only to bridge the budget gap but to help struggling residents make ends meet.
“Governor’s got $1.25 billion. He should spend it. If he can’t spend it, he should call us back so we can spend it,” Bates said this week in an interview on Zoom teleconferencing.
“My position is sooner rather than later. There are people out there who can’t wait. This next week or two is really critical economically.”
Bates, the lead Democrat on the House Finance Committee, made his comments prior to the guidance from U.S. Treasury coming out. But on Thursday afternoon, he followed up to say he believes states will eventually receive additional financial relief from the federal government.
He proposed a small business economic recovery plan.
Components would include letting taxpayers off the hook on fees, assessments or taxes between now and July 15. And he is urging direct relief, too.
“We should send checks to people. We’re going to send you a check. We’re going to send you a relief check to see you through this so that you’re still in this on the other side,” Bates said in an interview conducted over Zoom teleconferencing.
“When your house is on fire, you don’t worry about the water bill. You put the fire out.”
Of the president, Bates said, “He ain’t going to cut the line.
“Spend it. And then worry about the accounting later.”
March 25th Hardy Letter (Text)