As the new chairman of the Senate Finance Committee, Jason Barrett has a challenge ahead: the general fund deficit of more than $400 million anticipated by the Morrisey administration for the next fiscal year.
Barrett, R-Berkeley, said state officials are up to the task.
“I would agree with Governor Morrisey that we are facing some challenges for fiscal year ’26 budget. It’s something that those of us who have been in the Legislature and worked through the states finances over the past number of years were aware of,” Barrett said in a telephone interview.
Incoming Gov. Patrick Morrisey, a Republican, announced during his first week in office that his administration projects a budget deficit of more than $400 million for the fiscal year that begins next July 1.
Morrisey has consistently said West Virginia needs to tighten its financial belt. He described cutting back on spending as a prescription for financial pain.
“The era of big spending is over. It’s over. In West Virginia, the time for spending beyond our means is over,” the governor said last week.
The Morrisey administration will introduce its budget proposal when the regular legislative session begins Feb. 12. Then lawmakers on the House and Senate finance committees will hear financial reports from agency leaders and move toward their own version of a budget.
“We will, as the Senate Finance Committee and, I think, the entire Legislature plan to be extremely cautious as it relates to appropriating money in fiscal year ’26. I fully expect Governor Morrisey to lay out a very fiscally conservative budget when he gives that to the Legislature early next month,” Barrett said.
“Our committee, the Senate Finance Committee, is absolutely prepared to navigate a bit of a tough budget year moving forward. We’re aware of the resources that are available in state government, hundreds of millions of dollars, that are available within the state budget to ensure we have a balanced budget in fiscal ’26.”
He concluded, “I have absolutely no concerns whatsoever in our ability to have a balanced budget in the next fiscal year.”
Morrisey described three factors leading to the projected budget deficit:
— a “structural deficit” built into the baseline — including a “heavy reliance on one-shot revenue paying for ongoing obligation.”
— rising expenses related to education.
— rising costs for the Public Employees Insurance Agency
Barrett agreed that rising prescription drug costs will continue to be challenging for PEIA. He also underscored that insurance for state workers is based on their pay, rather than their health risks like other insurance plans.
On education, Barrett noted the the Hope Scholarship school choice initiative continues to rise as an expense, particularly as the program opens to all students not enrolled in public schools in 2026. “We’re going to be very mindful of the additional expense that will come from the Hope Scholarship,” Barrett said, while praising the program.
On other spending that Morrisey described as a structural deficit, Barrett said, “As far as one-time spending, primarily the Legislature was very aware of spending federal dollars to be used for one-time expenditures — whether that was infrastructure, whether that was shoring up unemployment compensation.
“We were very mindful of spending federal dollars, to not use that for base-building but to use that for one-time expenditures.”
His predecessor as finance chairman, Senator Eric Tarr, emphasized the need for flat budgets or reductions to manage the deficit.
Tarr, appearing last week on MetroNews’ “Talkline,” said that in preparation for income tax cuts, the Legislature had aimed to keep spending growth at no more than 3% a year. However, he said, the past couple of years resulted in financial moves beyond that target rate.
He attributed getting out of line to state employee pay raises, accelerating the reduction/elimination of the income tax on seniors and additional factors such as growth of the scholarship program and workforce safety net expenses.
“And what that results in is probably around a $300 million deficit coming in for fiscal year ’26,” he said. “What we expected, instead of being at a zero net this year — in other words, meaning that revenues meet expenses and vice versa — that should have been two years out from now, is what we planned,” said Tarr, R-Putnam.
“But for having done that overspending, it’s moved it up two years. Now, it’s not as dire as it seems because we also set around quite a bit of reserves here and there to accommodate for when this is going to happen in a couple of years.”
Kelly Allen, executive director of the West Virginia Center on Budget & Policy think tank, said a trade-off of tax cuts versus the state’s lessened ability to provide financial support for education and healthcare should have been apparent.
“It seems unlikely that the majority of state lawmakers who supported tax cuts in 2023 and 2024 were in on the plan that they were essentially voting for insolvency for PEIA, Medicaid, and K-12 education,” Allen said.
“While, to be clear, our state already has very competitive tax rates with our neighbors, deeper tax cuts will never be appealing enough to offset the downsides of being unable to fund high-quality schools, a healthy population and basic infrastructure.”