Gov. Patrick Morrisey outlined his administration’s findings that led to a conclusion that the state faces a deficit next fiscal year of several hundred million dollars.
“We’re going to fix them,” he said. “I want to look the West Virginians in the eye and tell them we’re going to solve these problems.
The new governor also announced another round of officials to round out the leadership of his administration.
Morrisey had described a $400 million deficit during a briefing his first week in office. Today, he walked from a podium to a whiteboard and laid out some of the specific areas where his administration’s financial team believes the state will be out of balance.
“These are the projections based upon where the base was, but if you keep throwing the cost of doing business to the back of the line and expect that future people are going to have to deal with it you’re basically throwing a mountain of problems into the back. That’s exactly what’s happened,” he said.
He said the financial issues include:
— a $153 million shortfall on the state’s share of Medicaid spending. The governor said the state has been using one-time money to fill that gap, a financial practice that cannot be sustained.
“Now, I’ll be the first to tell you, you can certainly utilize one-shot money. We’re going to have to utilize some because we can’t fix all the structural problems of a deficit overnight,” Morrisey said.
“But if you keep just paying the bills from one-shot money, what happens? You run out of one-shot money and you’re left with a big deficit.”
— $62 million to the state’s share of expenses related to the Public Employees Insurance Agency.
“This is base spending to make the formula grow, which they’ve artificially suppressed in previous years,” Morrisey said, likely referring to the use of a PEIA rainy day fund by the prior administration.
— $12 million resulting from the funding formula for higher education. He also said a $29 million decrease in local property tax collections will require state funding to rise by that much under the state K-12 school aid formula. And he projected increased costs from the Hope Scholarship.
“We’re working to address all these, but the education piece is a big driver of the budget,” Morrisey said.
— $13 million for tourism. “Tourism was another area where they were doing one-shot money, so the base budget is underfunded by about $13 million,” he said.
— Another expense for the current fiscal year is an additional $47 million needed to fund Division of Corrections and Rehabilitation though June, Morrisey said.
He said that money will be required by March. “We know that a lot of the salaries, the medical care, the expenses are set to expire in March. That was intentionally done so that there would be a need to come back to the Legislature,” Morrisey said. “We have to work to find a solution for that.”
Morrisey said the financial challenge with the Division of Corrections will also extend into next year because it’s built into base spending.
— And he described a current fiscal year expense of $22 million for the public defender program.
“We’re looking at about $22 million to get to what’s effectively required under the law, and these are significant dollars,” Morrisey said.
— Morrisey said an additional personal income tax cuts that the state took on this year don’t match with the spending demands.
“When they were cutting the taxes, I said, ‘Please continue to cut the taxes, but we must pay for them.’ The taxes have not been paid for,” the new governor said.
“So if you look at that 4% tax cut, that’s approximately $96 million. If you look at the 2% that’s about $46 million. We’re going to find a way to make that happen. We’re going to drive forward because West Virginia citizens deserve a tax break, but we can’t just keep foisting new debt and new obligations on future generations.”
Morrisey, a Republican, said his administration will aim to continue cutting taxes, but he said the state will have to find a way to do so responsibly.
The governor also announced several new appointments to fill out his administration:
— West Virginia National Guard Adjutant Gen. Bill Crain is retiring, he said. Morrisey announced Brig. Gen. Jim Seward as the new adjutant general. Later, Morrisey described the desire to combine the adjutant general’s duties with leadership of the Department of Homeland Security.
— Ryan Kennedy as the new secretary of Department of Veterans Assistance.
— Jim Mitchell as the new superintendent of the West Virginia State Police.