Heading toward an incoming administration and a newly-seated legislature, West Virginia’s state revenue is just above water.
The latest state revenue figures show collections are just about $5 million ahead of projection. That is the margin for the $2.1 billion in general revenue that the state has collected for the fiscal year that started in July, and it’s just a sliver of the revenue estimate of $5.26 billion for the full fiscal year.
“So really, we’re right on budget. We’re right on time,” said acting Revenue Secretary Larry Pack, speaking on MetroNews’ “Talkline.”
“It’s exactly where we thought we would be at this point in time for the year. We feel very comfortable with our revenue estimate for the entire fiscal year through June 30 next year.”
The current financial trend could give state officials a slim margin for any additional spending after Gov. Patrick Morrisey, a Republican, takes office Jan. 13 and after the Legislature gavels into regular session later than usual next year, Feb. 12.
Those officeholders could face some financial pressures from the jump. State workers, particularly educators, have been vocal already about rising costs of health insurance. In recent years, officials have held those rising insurance costs at bay or provided a financial cushion through pay raises. The average 5% pay raises approved earlier this year amounted to about $123 million altogether.
Morrisey, as he prepares to take office, has focused most of his comments about finances in terms of seeking “efficiencies.” “I want to make sure taxpayers get the value of every dollar that is spent,” he said last month while describing efforts toward “repurposing and resizing government.”
One way or another, the belt is tightening.
This time last year, the state’s revenue report just for the month of November, 2023, showed that collections exceeded estimates by $44 million. After five months of the last fiscal year, collections exceeded estimates by $286.2 million.
The state report released today for this past November showed that revenues exceeded estimates by $18 million — a bounce-back from prior months that had been flat or down but low compared to the prior year’s incoming cash.
In large part, lower revenue was realistic after a series of personal income tax cuts. State officials agreed to put a 21.25% income tax cut into effect, and more tax cuts are impending.
“It says that the income tax cuts are still phasing in, so we still have some work there,” said Pack, a senior adviser to the governor.
He added, “What the governor decided, and what the legislature agreed with, is the State of West Virginia was taking too much money from taxpayers. So what they wanted to do is to allow taxpayers to keep more their money in their pockets.”
Another 4% tax cut will kick in starting in January because the state hit an economic trigger. Just weeks ago, officials agreed to a 2% cut on top of all that.
“We feel very comfortable with the revenue estimates through June 30 of 2025 even with these additional tax cuts,” Pack said.
The state faces additional spending commitments in coming months, like the continued rollout of the Third Grade Success Act and estimated additional costs for more Hope Scholarship enrollment. Expansion of the Hope Scholarship in 2026-27 for all eligible non-public school students could result in an additional state expenditure of $150 million to $200 million.
The flat pace of state collections is cause for concern in the face of the state’s many financial needs, said Kelly Allen, executive director of the left-leaning West Virginia Center on Budget & Policy think tank.
“It’s concerning to see state revenue collections five percent (or $113 million) below where they were at this point last year even before additional tax cuts begin impacting collections in January,” Allen said.
“State lawmakers are facing a myriad of needs in 2025 due to years of budget austerity including PEIA, public school funding needs, and a child care cliff, but with far fewer resources to address them due to tax cuts that were too deep, too fast.”
Senate President Craig Blair, a former finance committee chairman, described the most recent months state revenue as “not bad” but also said it “wasn’t a blockbuster.”
“To a greater degree, that’s flat,” Blair, a Republican, said on Panhandle Live.
Blair, who won’t be returning to the Senate next year after a primary election loss, predicted the tax cuts will produce economic growth over time. And he suggested the incoming Morrisey administration will be responsible stewards of state dollars.
“It’s going to take a little time to get acclimated, to understand all the nuances,” Blair said.
Addressing the rising costs for the Public Employees Insurance Agency, Blair said, “PEIA will be something that Governor Morrisey will actually have to go into and address and get it right — long-term get it right.”
Blair’s suggestion is to offer another pay raise. An element of his comments seemed to be increased privatization of health insurance for state workers.
“What I would actually do is go in and calculate up what you pay for each one of our employees for their PEIA and give it to them as a pay improvement,” he said.
“And when you do that, it’ll make it so that West Virginia’s teachers will be one of the best paid teachers there is out there in the country, and you won’t be coming in saying ‘We’re ranked 35th, 36th, whatever it may be.’ No, you’ll be paid very well. Then you can go out like many of us do and go out into the private sector and be able to get your health insurance.”