CHARLESTON — With state tax collections expected to shrink 2.3% in the 2020-21 budget year, Gov. Jim Justice is proposing a “flat” $4.58 billion general revenue budget for the coming fiscal year — a drop of $108.64 million from the current state spending plan.
However, the 2020-21 budget bill — which was still a work in progress Wednesday afternoon — will use one-time appropriations to avoid spending cuts, state Budget Office Director Michael Cook said during a media briefing on the budget plan.
“We tried to maintain a flat budget,” he said.
That austere budget includes no across-the-board pay raises for public school or state employees, and includes only about $49 million — roughly 1% of the total state budget — for new funding initiatives.
The proposed budget includes a $26.4 million increase for Child Protective Services, a program that has been overwhelmed as the statewide opioid drug crisis has shattered families.
That breaks down as a $14.9 million increase for social services, a $7 million increase for the state-managed Children’s Health Insurance Program (CHIP) and $4.4 million to address CPS worker vacancies.
The Justice budget also includes $19.7 million to eliminate a 1,060-person waitlist for the intellectual and developmental disability (IDD) waiver program to provide in-home and community-based services.
Otherwise, the proposed budget includes just two small one-time budget enhancements: $2 million for a backpack program that will provide schoolchildren with food to take home on Friday afternoons and prior to holidays, and $1 million for state food banks.
A downturn in tax collections in the current 2019-20 budget year is forcing the fiscal belt-tightening as natural gas prices and coal production have plunged and court orders have shut down massive natural gas pipeline construction projects in the state, Deputy Revenue Secretary Mark Muchow said.
“The lower natural gas prices are playing havoc on the coal industry, as well,” said Muchow, a 36-year veteran of the state budget process.“As long as natural gas prices stay where they are right now, the coal industry has problems,” he added, as power companies rely on cheap natural gas at the expense of coal-fired power plants.
Complicating matters is a drop in coal exports to near-record lows as the global economy slows, he said.
The current financial downturn follows a record 2018-19 budget year that saw 12.2% growth, resulting in more than $500 million of budget surplus.
Revenue Secretary Dave Hardy said the administration and legislators acted prudently in the 2019 regular session, using much of that surplus for one-time expenditures, rather than growing the base budget.
Last year, the Legislature appropriated $105 million for a PEIA reserve fund, which will help the state-managed health insurance plan avoid premium increases or benefits cuts through at least mid-2022, and moved $104.2 million to the Division of Highways for long-overdue secondary road maintenance.
The 2020-21 budget does have some bright spots, particularly a Medicaid fund balance that is projected to grow to $309 million by July 1.
That’s as increased employment and population losses have taken about 50,000 West Virginians off Medicaid rolls, and with savings of $54.5 million a year through a pharmaceutical managed care program for the health insurance plan for the state’s poor, disabled and elderly.
Justice is proposing putting $150 million of that balance into a Medicaid reserve fund that, like the PEIA reserve fund, could be used to smooth out financial rough patches for the plan in the future.
Muchow also said multi-billion-dollar pipeline construction projects in 2018 and 2019 will bring about $30 million a year of new property tax collections to the affected counties. That will benefit the state budget by reducing state School Aid formula allocations for those counties, he said.
However, he noted not all counties are enjoying the pipeline windfall, creating “haves” and “have nots” among counties and municipalities around the state.
“Some local governments have revenues they don’t know what to do with, while some local governments are struggling,” Muchow said.
Likewise, he said state sales tax collections are projected to grow $31.8 million in 2020-21 as e-commerce sales tax collections are expected to increase by some $50 million.
However, he said some of that internet sales tax growth will be offset by reduced sales tax collections by brick-and-mortar retailers in the state as retail locations close or lose sales to online competitors.