State officials today described a $465 million obligation to the federal government over covid-19 spending on education — and that dark cloud is casting a big shadow over the legislative budget process.
Legislative officials are talking definitively about a special session in May to address financial matters once major questions are closer to being resolved. Lawmakers will pass a budget during this regular session, as constitutionally required, but the end product could be more or less a placeholder.
Up in the air would be surplus spending that is important to communities, as well as additional tax breaks advocated by the governor and even pay raises anticipated by state employees.
“There’s uncertainty,” said Senate Finance Chairman Eric Tarr, R-Putnam, on MetroNews’ “Talkline. “We’re budgeting with uncertainty relative to that potential clawback.”
A budget passed by the Senate on Wednesday did not include tax cuts and there was no mention of pay raises. Tarr, on “Talkline,” expressed doubt about whether the state could currently bank on the year-over-year expense that the pay raises would represent.
There have been rumblings at the Capitol this week about a federal covid funding question that could affect other spending. There was no mention of it, though, either in the governor’s weekly administration briefing on Wednesday or in the Senate Finance presentation of a bare-bones budget.
The matter finally sprung forth in a mundane way. In a House Finance budget presentation on Thursday morning, Delegate Larry Rowe asked why the budget proposal did not include surplus spending priorities such as development of a $50 million agriculture lab at West Virginia State University.
The answer was a bombshell.
“We’ve been told by the federal Department of Education that we are $465 million in a clawback situation,” House Finance Chairman Vernon Criss told delegates and the other onlookers in the House Finance room.
He leveled that the executive branch has been negotiating on the matter with federal oversight authorities and that the situation could be resolved. Criss said lawmakers need to at least get through the process of passing a budget.
“We are to a point that because of timing we need to pass a budget. We need to do something today out of here so that we can receive the Senate’s so that we can introduce and go to negotiations this weekend to come up with something,” said Criss, R-Wood.
He continued, “I’m calling this act one. We hope to be back in May with a special session, with the governor’s permission, to know first of all that we’ll have that taken care of” before moving toward a lot of spending decisions that would normally be routine.
Shortly after that, members of the House Finance Committee passed out a budget bill without anywhere near the amount of discussion about particular line items that they’d normally engage in.
Brian Abraham, the Justice administration’s chief of staff, said in an interview around the Rotunda that the situation arose as federal dollars flowed to local school authorities during the covid-19 emergency and officials later provided rules for spending the money.
Overall, he said, the federal expectation was that states like West Virginia would spend on education at a ratio matching the federal outlay.
“It’s that we did not grow our education budget in proportion to our overall budget. In other words, when we gave money to roads or we gave money to something else, we did not give a like amount more to education,” he said.
Abraham said West Virginia’s formula-based education spending structure made that a challenge.
“We take in property taxes, we know the number of students we have, that’s the money that goes down to the counties to spend on education,” he said.
“Just to take a bucket of money and throw at that, the counties would have to just come up with something to spend it on: ‘Are we going to take more trips, are we going to buy more balls, put more baseball fields on?'”
Now, he said, West Virginia officials are negotiating with federal authorities to provide more state financial resources toward education spending to resolve the matter.
“We’ve offered up things like teachers pay raise, more (school building authority) spending, higher ed contributions in the nursing program. We think we’ve covered that delta. And we’ve met with the federal government and made that offer,” Abraham said.
Abraham said he anticipates a response from federal authorities, maybe as soon as this week, regarding a conditional waiver.
West Virginia’s Democrats put out a statement ripping the state’s handling of the pandemic relief dollars. Democratic Party Chairman Mike Pushkin accused the Justice administration of using covid relief dollars to make the state’s budget situation look better than it really was.
“The Justice administration used these funds to artificially inflate our budget surplus,” said Pushkin, who is also a delegate representing parts of Kanawha County. “Now that ruse has been exposed.”
House Speaker Roger Hanshaw, speaking on “Talkline,” expressed confidence the situation can be resolved without a crisis. He said the state’s message to federal authorities has been, “We are more than satisfying your expectations.”
“We think we’ve complied with the spirit of what the federal government expected us to do,” he said.
But Hanshaw, R-Clay, also expressed caution about any immediate spending decisions.
“What you’re likely to see pass the Legislature,” he said, “is a very ‘skinny budget’ this year.”