CHARLESTON, W.Va. — West Virginia state officials are preparing for the possibility of tightening the budget belt.
State Revenue Secretary Dave Hardy said leaders in the executive branch have been asked to come up with a framework for 4.6 percent cuts.
Hardy emphasized that is only a precaution and that if revenue begins picking up it might not be necessary.
“We have at least considered the possibility that we might be asking our cabinet secretaries and department heads to cut their budget by 4.6 percent by the end of the year,” Hardy said today on MetroNews’ “Talkline.”
The precaution is taking place because state revenue was below estimates the first two months of the fiscal year.
The state collected $32.9 million less in taxes than anticipated in July, the first month of the fiscal year.
Collections again missed projections in August by $16.8 million.
So that’s a total of $49.7 million below what was anticipated to start the fiscal year.
“That has been mitigated by the fact that September, we’re doing pretty well,” Hardy said.
So state officials are taking a wait-and-see attitude while having budget hearings over the next couple of months. Nevertheless, Hardy said efforts are starting for possible budget adjustments.
Gov. Jim Justice has often pointed to state revenue gains as evidence of economic success in West Virginia.
As positive revenue reports came in over the past year or so, Justice has led celebratory press conferences that sometimes included luau apparel.
At the end of the last fiscal year, the Governor’s Office issued a press release touting revenue growth of $511 million, describing it as the greatest single-year revenue growth total in West Virginia history.
“To think where we were when I came in the door – bankrupt – after special sessions trying to determine how much to cut and how many more people to run out of West Virginia,” Justice stated on July 1.
“We had budget crisis after budget crisis every summer. It just shows that my plan to bring our economy back to life is truly working, even beyond everyone’s wildest dreams.”
Hardy said the governor has encouraged caution after the past two months.
“The governor is very pro-active. He always has been,” Hardy said. “We started talking with the governor about, what if September is disappointing? The governor told us to go ahead and start proactively looking at the budget.”
Senate Finance Chairman Craig Blair, R-Berkeley, said that’s the right approach.
“I’m wanting them to do just what they’re doing,” Blair said in a telephone interview.
Blair suggested that some areas of the economy are stable, particularly overall employment. He suggested highways construction also serves as an economic stimulus.
“I believe we’re going to be able to maintain our revenues and be OK,” Blair said. “But let’s not miss this opportunity for being prepared and also looking for more efficiencies in our government.”
One of the challenges has been the major pipeline construction that provided an economic boost. Court challenges have slowed down that construction, affecting the related jobs.
Energy markets also have been down, particularly exports of met and steam coal along with the price of natural gas. Those have suppressed severance tax collections.
West Virginia celebrated a budget revival too soon, suggested Delegate Mick Bates, D-Raleigh, the ranking minority member of the House Finance Committee.
“Despite what everyone has been claiming with leis and flowers and rocket ship rides that the fundamentals of the West Virginia economy have really not changed,” Bates said in a telephone interview. “We’ve always been boom and bust based on the extraction industry.”
Bates noted that revenue estimates were raised repeatedly over the past year or so.
“It’s easy to raise but a whole lot harder to revise them down,” he said, suggesting that it’s prudent to now look at possibilities to trim. “They’ve made lots of commitments to spend money.”
He suggested that some tax cuts that were approved — such as a severance tax cut for steam coal from 5 percent to 3 percent over three years — might not have been wise. The change equates to $60 million by the third year.
“There’s no doubt,” Bates said. “There are plenty of people who were raising that red flag at the time.
Justice’s predecessor, Gov. Earl Ray Tomblin, faced an economic downturn that required mid-year, across-the-board budget cuts as well as use of money from the Rainy Day Fund.
Legislators wound up in special session two years in a row to work out a budget in tough economic times.
Bates dreads a potential repeat. He suggests the time is now to look at strategic cuts, rather than across-the-board cuts. And he suggested the Legislature, like the executive branch, should get started now.
“The time to address this issue is in November and December to try to come up with a plan,” he said, “not to get into a budget battle all over again like we have in past years.”