Nation’s governors ask for financial relief as West Virginia stares down $350 million+ budget gap

West Virginia’s governor is hoping a federal relief package will help state government get through a fiscal emergency, and America’s governors are asking for more billions more in help.

Response to the coronavirus pandemic is causing enormous expense for state governments while the national health emergency also suppresses finances from sources such as income taxes and sales taxes.

West Virginia is eyeing a budget deficit, Gov. Jim Justice said, of more than $350 million.

“If you look at it purely  from an economic standpoint, here’s where West Virginia is: West Virginia is going to run a deficit in this year probably somewhere north of $350 million if we continue to be completely shut down for the balance of the (fiscal) year,” Justice said during a news conference last week.

Describing West Virginia’s tax base, Justice said, “Well, they’re not going to come in, that’s all there is to it. Because all of our businesses — everybody’s shut down.”

Every state is facing that kind of fiscal pain.

The National Governors Association on Friday called on Congress to allocate an additional $500 billion for aid to states.

A joint statement was issued by Maryland Gov. Larry Hogan, a Republican, and New York Gov. Andrew Cuomo, a Democrat.

“In the absence of unrestricted fiscal support of at least $500 billion from the federal government, states will have to confront the prospect of significant reductions to critically important services all across this country, hampering public health, the economic recovery, and — in turn — our collective effort to get people back to work,” the governors wrote.

In addition to the request for additional funding, the governors wrote that stabilization funds should have the flexibility to be used to replace lost revenue and not only be tied to the expense of responding to covid-19.

“Despite this grave challenge, the recently passed federal CARES Act contained zero funding to offset these drastic state revenue shortfalls,” they wrote.

“To stabilize state budgets and to make sure states have the resources to battle the virus and provide the services the American people rely on, Congress must provide immediate fiscal assistance directly to all states.”

Hogan announced a budget freeze for Maryland on Friday with some projections that the state could lose out on $2.8 billion by the end of June, if the stay-at-home order remains in place that long.

In Virginia, Gov. Ralph Northam last week suspended new spending and withheld what would have been deposits into the state’s reserve fund to pay for essential services instead.

Facing a possible $4 billion deficit, Pennsylvania Gov. Tom Wolf has cut spending, laid off thousands of state workers and frozen all non-essential hiring and purchases.

West Virginia’s Justice has not announced any fiscal actions so far — not even an official, downward adjustment of state revenue estimates.

Justice has said several times during daily news briefings that he believes the federal relief package can be counted on to cover expenses, although he has said the state’s Rainy Day Fund might have to bridge the gap.

Asked last week about the state’s fiscal condition, Justice again referred to the federal relief package and the $300 billion it allocates to states for covid-19 response.

States like West Virginia are carefully watching the upcoming release of rules for spending that money, Justice said. He indicated West Virginia’s share is expected to be about $1.2 billion.

But that money, right now, is believed to be for direct response to the pandemic.

“So we know that if we can qualify, there is a minimum of $1 billion, 250 million that could flow to West Virginia,” Justice said. “The problem with it, right now is one thing, and that is the way the rules are written today the backfilling of revenue is not included.”

He concluded, “We need that rule change, and all the other states are pushing that.”

With that not yet certain, the governor said he is not yet ready to call a special session of the Legislature to move around money to pay the bills.

“What we’re trying to do as far as a special session is wait until we’ve got the rules,” he said. “But after the rules come out, we’ll know at the time — are we going to have an influx of federal dollars that are going to backfill the revenue deficit.

“And if they backfill the revenue deficit then there’s no need to go into any level of special session, whether you do it virtually or not.”

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