CHARLESTON, W.Va. — Senate President Mitch Carmichael says $100 million in anticipated budget cuts for state agencies are a reason officials need to carefully assess optimistic revenue estimates.
“One must live within their means,” Carmichael said on MetroNews’ “Talkline.
“I think it begs the question about these up and down revenue estimates we receive and this profligate spending that often occurs with enhanced revenue estimates.”
— MetroNews (@WVMetroNews) October 28, 2019
State Revenue Secretary Dave Hardy announced Friday that agencies have been asked to trim budgets now while also preparing to cut for the next fiscal year. The $100 million is the anticipated cut out of the $4.7 billion general fund.
The directive comes only a few months into the current fiscal year, which began at the start of July.
Carmichael acknowledged the proposed cuts will be challenging for state agencies, which are likely to freeze hiring or delay capital expenditures.
“It would be unreasonable to expect that there would be zero impact of reducing a budget by a hundred million dollars. Then it begs the question of why didn’t you cut it out before? So certainly there would be some impact,” said Carmichael, R-Jackson.
The state’s budget picture was much better just a few months ago.
Relative fiscal health meant state leaders were willing to back significant spending items such as $105 million in pay raises for most state employees and an additional $105 million to shore up the Public Employees Insurance Agency.
There were other spending increases such as $25 million for Jim’s Dream for addiction recovery and workforce training, $10 million for tuition for students pursuing technical degrees, $5 million spread across community and technical colleges and $10 million for four-year colleges.
The budget bill reflected tax reductions for Social Security income, severance tax cuts for steam coal and limestone and a stripper well tax cut.
All that seemed possible when economic times were better.
“Yes, there are some incongruities as it relates to rocket ship rides and enhanced revenue estimates and throwing around pay raises and spending money wildly,” Carmichael said.
“We have not done that in the Legislature. We’ve held the line on spending, and it is a good thing that we have.”
Gov. Jim Justice raised revenue estimates four times during the last half of the past fiscal year. Those adjustments totaled $308.2 million.
But over the first few months of the current fiscal year, revenue collections have, generally, fallen short of the estimates.
The state exceeded estimates in September by $20 million. But with the other down months, that still put collections $29.8 million behind estimates for the first three months of the fiscal year.
“More than anything, what this shows is that we always need to remember that we have to live within our means,” Justice stated in a press release after the September collections were announced.
“Naturally, we were bound for a dip eventually. We saw our numbers turn around for the good again here in September. But, if nothing else, our first quarter this year shows that we have to continue to err on the side of caution and remember we still have work to do and more people to help. And that’s exactly what we’re going to do.”
The change has been attributed to slumping coal and natural gas markets, leading to lower severance tax collections.
“It crystalizes for all of us on the fact we are way too dependent on one industry, the fossil fuel industry,” Carmichael said.
“We must diversify our economy and incentivize other downstream industries, the manufacturing growth and all of those things we need to really grow our economy so that when we have a decline in one particular segment then others can prop it up.”
Senate Minority Leader Roman Prezioso said state officials should have been even more cautious about fiscal reality.
“It’s not like we didn’t tell ‘em, right?” Prezioso, D-Marion, said in a telephone interview.
“The way the money was spent the last couple of years was not right. I know we got blamed for not giving extravagant pay raises. You don’t want to put yourselves in position where cuts are going to happen.”
Prezioso, who serves on Senate Finance, said legislative leaders should have said no more often.
“You don’t have to agree with what the governor does. You’ve got the final vote on what the budget should be. The governor is only going to make suggestions. Any governor is going to initiate more programs than he really needs,” Prezioso said.
“When it comes right down to it, the fiscal responsibility of the state budget lies within the state Legislature.”