New Gov. Patrick Morrisey says his administration projects a budget deficit of more than $400 million for the coming fiscal year.
“Now, it’s important that when you talk about the budget, we’re talking about what we inherited,” said Morrisey, adding that the big number doesn’t factor in any new spending priorities, any additional tax cut or new resources for addressing some of West Virginia’s spending challenges.
“This is what we’ve inherited. This is where we are, day one of the new administration.”
Morrisey’s assessment of the state’s fiscal condition was in contrast to financial characterizations by his predecessor, Jim Justice, who is now a U.S. senator.
Even as monthly revenue estimates came in flat in recent months, Justice had described being on solid financial footing.
During an appearance last week on MetroNews’ “Talkline,” Justice responded to a question about whether budget expectations were warped from reality.
When Justice was first sworn in as governor in 2017, his administration forecast a budget deficit nearing $500 million.
“If you don’t think West Virginia is really, really rolling right now compared to where we were, you’ve got to be living in a cave,” Justice said last Friday on “Talkline.”
“You’ve got to be living absolutely in a cave to not know how bad it was and how good it is now. I mean, there is right at $2 billion that’s in rainy day funds and the (personal income tax) fund that I’m passing on to Patrick Morrisey, to Governor Morrisey-to be.”
Morrisey said his administration’s financial assessments have been produced by a team including budget director Mike McKown, who is returning to that role after serving for many years in prior administrations, and Eric Nelson, the new revenue secretary who was once the Finance Committee chairman in the House of Delegates.
Morrisey described a “structural deficit” built into the baseline — including a “heavy reliance on one-shot revenue paying for ongoing obligation.”
That’s represented in the current budget, he said, by $252 million in funds that really should be one-time spending to pay for ongoing expenses. Of that, he said, $153 million is from dollars that would have been set aside for Medicaid matching dollars.
“So from our perspective, this is a big part of the whole structural problem with the budget that we’re going to begin to address,” he said. “Now, all of the issues with the budget are not going to be handled on day one. It took a while to get to this problem. We’re going to have to do a lot of work to change it.”
He described another major, rising expense as costs related to education. He did not specify anticipated additional costs for the Hope Scholarship school choice initiative, but as the program opens to all students not enrolled in public schools in 2026 the state expenditure could grow to an estimated $150 million to $200 million.
Rising costs for the Public Employees Insurance Agency also are a major factor, Morrisey said. Inflation in the cost of prescription drugs was a major driver of financial strains this year, and the agency’s five year plan reflects anticipation of continued rising expenses.
“I mentioned some of these issues not to express, you know, a problem or concern or say what we’re doing or not doing, just to point out some of the structural problems that we have with it. There will need to be some important choices and prioritization to make sure that we’re putting the needs of the citizen first,” Morrisey said.
“We’re not going to talk about and address all the solutions to these problems. You will be able to see that when we submit the budget in the next month to the legislature. We’re working on it.”
Morrisey said his administration would reinstate six-year budget projections that had been discontinued under the Justice administration.
“I believe that these six-year projections are going to help with transparency, accountability and responsible budgeting for the short and long term,” Morrisey said.
Kelly Allen, executive director of the nonprofit West Virginia Center on Budget & Policy think tank, said Morrisey’s candor in discussing the state’s finances “is a refreshing change.”
But she pointed toward a series of income tax cuts the state has pursued in recent years. Morrisey has said he would like to move forward with additional tax cuts, although he says the state would need to show it can absorb them financially.
Allen said the new governor’s analysis so far “leaves out that recent tax cuts were too deep, too fast and are a major driver of the structural imbalance.
“It would cause great harm to the state’s economy and our people to propose balancing those tax cuts—that largely benefited the few wealthy households in the state — with cuts to public education and Medicaid, which combined impact nearly every family in West Virginia.”
Allen concluded, “There are responsible ways the state could raise revenue by ensuring the wealthy and industry pay their fair share—without raising taxes on most West Virginians—that should be considered before cutting critical programs.”
Other announcements
Morrisey said his administration will work with the Legislature to consolidate the existing Department of Arts, Culture, and History with the Department of Tourism.
“These consolidations are an initial step toward making state government more efficient and effective.”
He also announced several new cabinet appointments:
- Dr. Matthew Herridge – Secretary of Commerce
- Nicholas Preservati – Deputy Secretary of Commerce
- Chelsea Ruby – reappointment as Secretary of Tourism
- Stephen Todd Rumbaugh – Secretary of Transportation and Commissioner of Highways
- Michael DeMers – Deputy Secretary of Transportation
- Dr. Arvin Singh – Secretary of Health