CHARLESTON — Personal income in West Virginia grew by 4.89% in 2020, the largest rate of growth in 20 years, but growth that was fueled entirely by a surge in federal government transfer payments — stimulus checks, enhanced unemployment benefits and other pandemic relief, a new analysis from Pew Charitable Trusts shows.
“Every state experienced an uptick in total personal income last year as historic gains in unemployment benefits, federal aid, and other public assistance drove the sharpest annual growth in two decades,” the report notes. “Without government support, most states would have sustained declines in personal income — a key economic indicator — as the COVID-19 pandemic took a toll on business activity.”
West Virginia’s 4.89% growth in personal income exceeded the U.S. average of 4.86%, but it was fueled by a 24.92% increase in federal government transfer payments for the year, Pew found.
Otherwise, earnings — which include wages from work, plus extra compensation such as employer-sponsored health benefits, Medicare and Medicaid, and business profits — fell 3.45% in West Virginia in 2020, a steeper drop than the U.S. average of -0.90%, the study found.
Pew found that West Virginia suffered the fourth most-severe drop in wages and employee compensation in 2020: “Hawaii, (-7.7%), Wyoming (-4.0%), Nevada (-3.8%), and West Virginia (-3.5%) experienced the largest declines.”
Prior to the pandemic, in 2019, personal income in West Virginia grew at an anemic 0.25%, according to the report, far below the national average of 2.12% growth.
That runs counter to the narrative Gov. Jim Justice espoused throughout 2020, claiming the state economy was booming despite the pandemic and downplaying the impact of federal stimulus funds on the state’s financial outlook.
Announcing that West Virginia had finished the 2019-20 budget year last June 30 with a revenue surplus, the governor declared in August 2020, “Our economy has just kept percolating and percolating and percolating along.”
He also declared that the state had diversified its economy, citing plunging severance tax collection as proof that the state no longer is overly dependent on the coal and natural gas industries.
“West Virginia is really the diamond in the rough that everybody’s missed,” Justice said of the state’s economy.
The governor repeated that premise in his 2021 State of the State address in February, telling legislators, “West Virginia has not only dug itself out of a hole and got itself on a launch pad, it’s even taken itself off and become that diamond in the rough that everybody’s missed.”
Shortly after, a West Virginia Department of Revenue report determined that the state had received $5.99 billion in federal pandemic stimulus funds to that point, an amount surpassing the state’s entire $4.57 billion general revenue budget for 2020-21.
The Pew study noted, “Government assistance swelled in 2020 compared with a year earlier as policymakers pumped money into the economy to help Americans weather the pandemic, which upended normal economic patterns and left millions unemployed for much of the year.”