It’s increasingly likely that West Virginia state government will have to reduce spending the rest of this fiscal year and also next year.
Five months into this fiscal year, state tax collections are running more than $50 million short of estimates. Governor Tomblin’s Chief of Staff Charlie Lorensen says if revenues continue to run about four percent below projections, then mid-year cuts will be in order.
“Being fiscally responsible and not raising taxes, there is one major way to go and that is to limit expenditures and adjust appropriations so that they match the actual revenues received,” Lorensen said on Metronews Talkline Tuesday.
That likely means state agencies would have to reduce spending for the remainder of the fiscal year. That could be accomplished with a hiring freeze, depending on the size of the cut.
But the July 1st start of the new fiscal year won’t necessarily bring relief. Lorensen expects Governor Tomblin to propose a budget plan that cuts most state agencies by 7.5 percent starting July 1st.
“We’re fiscally responsible and we’ll have a balanced budget,” Lorensen said. Governor Tomblin has been a good steward of the state’s finances, but it should be noted that the state Constitution prohibits deficit spending.
The gloomy outlook makes it highly unlikely that Tomblin will propose any across the board pay raises in his State of the State address January 8th. That will upset public employees and school teachers, who say they are overdue for an increase.
The teacher unions believe their willingness to compromise on the big education reform bill during the last Legislative session means teacher salaries should now be a priority. As always, however, the question is “where will the money come from?”
Tomblin may be willing to bend on one-time expenditures, but if recent history is any indication, he’ll be reluctant to commit to salary increases that add to the bottom line of the annual budget.
It is evident West Virginia’s economy simply is not robust enough. Personal income tax collections, which make up the largest share of state revenues and are a leading indicator of the condition of the state’s economy, are sluggish.
Uncertainty in the coal industry, caused by increased competition from cheaper natural gas and the EPA’s punitive policies, are impacting the southern coalfield economies.
Also, Tomblin budget planners grow more concerned every year about the rising cost of Medicaid, the state’s health care program for the poor, while lottery and gambling revenues continue to taper off.
West Virginia will continue paying its bills and it’s unlikely any state worker will lose their job. However, given the state budget projections, it’s difficult to imagine state government spending any additional money, at least over the next year-and-a-half.