West Virginia lawmakers passed a $4.65 billion general revenue budget at the end of their regular session. Tacked onto that was another billion dollars in possible spending, an unprecedented amount on the strength of federal relief dollars.
There are always additional funding items as a sort of epilogue to the budget, based on the possibility that state government could end the year with a surplus. Aside from lawmakers hoping to see funding for their favorite causes, little attention is usually paid. This year’s amount, though, was particularly eye-popping.
“What’s different about this year’s budget from prior years is the magnitude of that number,” House Speaker Roger Hanshaw, R-Clay, speaking this week on MetroNews’ “Talkline.”
The additional spending would only happen if the surplus truly comes to be at the end of the fiscal year, June 30.
Right now, though, the state is on that track. The overall revenue above estimates through the end of February was $589 million. So, as Hanshaw assessed based on the current trajectory for state revenue, “It’s likely to happen.”
That amount of money is an enormous windfall — and a great responsibility — for the state.
Delegates spent a couple of hours before passing the budget engaged in a vigorous debate over whether the process up to then had been open enough — or whether it had been too dominated by staff analysts, representatives from the Governor’s Office and the Finance Committee chairmen from the House and Senate.
Moreover, they questioned whether they’d had enough oversight of the billion dollars in possible surplus. Is that money the path to ongoing spending? Should there be more clarity on the priorities already expressed for the billion dollars? Does executive branch influence over revenue estimates and budget priorities limit the kind of oversight that lawmakers are responsible for providing?
“I do not believe the surplus is building the base, but it’s building the future,” House Finance Chairman Eric Householder, R-Berkeley, said today on MetroNews’ “Talkline.”
Where is the $1 billion surplus coming from? How will it be handled? Eric Householder, House Finance Committee Chairman (R-Berkeley), provides context about this huge surplus to @HoppyKercheval. WATCH: https://t.co/yCFQ3nDJuy pic.twitter.com/r86wxxLAK0
— MetroNews (@WVMetroNews) March 15, 2022
On the House floor on Saturday morning, Delegate Marty Gearheart raised all those issues and wound up voting against the budget. One of his objections was a financial adjustment letter sent by the Governor’s Office late in the week, prompting changes that the House Finance Committee hadn’t gone over previously.
“This is not our budget. This is the governor’s budget,” said Gearheart, R-Mercer.
“And when we get ahold of it on Day 59, it’s a little difficult to determine whether it’s really what we wanted to do or not. This is a $5.6 billion budget — $4.6 in the budget, a billion to pay what we underestimated our revenue last year. Which probably means, unless the world goes to an end, we’ve already underestimated the budget for next year by a billion dollars, and I’ll be having to take more blood pressure pills next year.”
Delegates wound up passing the budget bill overwhelmingly, but not before many similar concerns were aired about process and surplus.
Of the billion dollars in possible spending at the end of this fiscal year, the biggest items include:
— $600 million, the biggest piece, aimed toward development loans through the Department of Economic Development.
Householder, the House finance chairman, said that money could be used to attract new companies to the state, much the way West Virginia offered incentives for Nucor Steel earlier this year. “This way we’re going to be ready,” he said.
— $256 million held in savings for the possibility of tax cuts on down the line.
This resulted from the House majority’s desire to cut the personal income tax, but that was hedged by caution about whether using federal relief money for tax cuts would result in a claw-back by the federal government.
“The governor was concerned by, maybe, some of the clawback concerns of the ARPA fund,” Householder said, referring to the federal American Rescue Plan. “So I said ‘OK, well there’s no provisions that prevent you from saving money, so let’s put money in the back of the budget and save for future tax reductions.”
— $100 million to the governor’s civil contingent fund, meant to augment possible congressional earmarks.
“Basically seed money, same thing,” Householder said. “A lot of times we need to pay for the projects up front before we can get the federal drawdown, federal match. So the governor had the foresight in his adjustment letter to say ‘Look, with this money coming down the pipeline let’s put the money in the general revenue surplus section.'”
Gearheart specifically questioned this allocation, wondering what the money is supposed to match. “We haven’t had a budget come to us scrambled like this one is, with an extra hundred million dollars for a match that we have no idea what it’s going to match,” he said.
“So we have a hundred million dollars that’s going to do something that the governor wants to do that we’re going to get some federal money for, maybe. We don’t know what, we don’t know where, we don’t know when.”
— $50 million for a mining reclamation insurance mutual just established by the Legislature.
Delegate Pat McGeehan, R-Hancock, questioned additional priorities among the surplus spending, including $7 million for Tourism brand promotion. He asked why that was more than the $652,000 in possible additional spending for a veterans nursing home or $149,000 in possible additional spending for veterans’ home services.
“That reflects a certain value that we’re sanctioning here if we go ahead and concur with this,” McGeehan said, going on to speak passionately about the tragedy of veteran suicides.
He said the surplus allocations give the appearance of “people up in Charleston having all this fun money, coming up with creative commercials or little nifty meetings for economic development conferences. Yet we can’t get serious about a lot of other systematic problems we’ve got in this state.”
This year’s budget process began when Gov. Jim Justice proposed a generally flat, $4.6 billion general revenue budget — with the significant exception of the average 5 percent pay raise for state workers.
“For the fourth year in a row, I am proposing an essentially flat budget, which includes a third historic pay raise and Inflatocine for our state employees,” Justice said in his State of the State address, referring to his term for an employee bonus that he meant to serve as a sort of vaccine for the effects of inflation.
Delegate Mick Bates, R-Raleigh, questioned whether that characterization of a “flat budget” matches reality, though. He pointed to the surplus allocations.
“So the only reason this budget is flat is because the general revenue number stays the same,” Bates said during the budget debate. “If you take the general revenue number and you add in all the stuff that’s in the back, including the surpluses, we’re blowing this thing up by a little bit short of a billion dollars by passing this budget.
“Now, I used to be a Democrat. I used to get accused of taxing and spending,” said Bates, who switched parties last year. “Now I’m a Republican. You know what the difference is? We just spend and don’t tax.”
The billion dollars of surplus is actually an illusion, the result of artificially low revenue projections and federal relief dollars, said Kelly Allen, executive director of the nonprofit West Virginia Center on Budget & Policy.
“These low revenue estimates seem to be due to a stubborn commitment to a ‘flat budget,’ which isn’t simply staying at pace, but losing ground,” she said, adding that when adjusting for inflation the fiscal 2022 budget is $668 million less than what the state spent in 2013.
“By holding to a flat budget, we neglect to invest those hundreds of millions of dollars in making higher education more affordable, investing in foster children and families, or ensuring that households are more economically secure, even though we have the means to invest in these critical needs.”