For the past few years, the state of West Virginia has fared
relatively well financially despite the slumping economy. A combination
of sound budgeting and the fact that West Virginia is more experienced
in dealing with limited revenue has kept our state’s head above water
while numerous other states are facing staggering deficits and have had
to raise taxes. But now, just as the economy appears to be moving in a
more positive direction, West Virginia is finally feeling a significant
financial pinch that may force immediate cuts, and will definitely
require major cutbacks in the coming fiscal year.
In the Legislature, we have been holding our breath, knowing this could
happen but hoping that the economy would recover before it dragged West
Virginia’s budget down. Unfortunately, as was recently reported in the
media, the state’s November tax collections were about $24 million
below projections – the third time this year tax revenues have fallen
short of expectations during the 2003-2004 fiscal year, which began in
July. As a result, Gov. Bob Wise has said the state will have to reduce
spending by 2.9 percent this year to prevent a $15 million to $20
million deficit.
There is some possibility that the tax collections during the next few
months could make up for the loss. Regardless, it is already clear that
the 2004-2005 budget will be extremely tight, and major cuts will be
required. Next year’s budget is more than $100 million short, due in
large part to the increasing debts of the state’s pension and health
care programs and an expected flat revenue stream.
Where any of the cutbacks will come from has yet to be seen. Last year,
the Governor called for most state agencies to cut their budgets by 10
percent. Although Gov. Wise mentioned last summer that another round of
cuts, perhaps by 9 percent, might be needed, he has since said he wants
to avoid similar across-the-board cuts next year if at all possible. In
the end, only the State Police and the Division of Corrections will
likely be left alone.
In the past, public education has also been immune from cutbacks, but
that may not be the case in next year’s budget. Because public
education consumes more than 50 percent the state’s general revenue
budget, legislative leaders feel compelled to consider it. While I
believe the Legislature will be careful not to tap programs that
directly affect the classroom, the state Department of Education’s
administration will be closely examined.
Another belt-tightening possibility being considered by leadership is a
temporary shutdown of state government, perhaps for a day or two. By
forcing most state employees to take a day or two off without pay, the
state could save a significant sum. Essential services, such as law
enforcement, would be maintained, so some state employees would still
work. If such a furlough were enacted, House Speaker Bob Kiss said it
would probably take place after July 2004.
The Governor has also warned that pay raises for teachers or public
employees are not likely, even though those groups did not receive
raises this year.
West Virginia’s budgetary picture is bleak, but there are a few
positives. With the exception of the cigarette tax increase last year,
the Legislature has not raised general revenue taxes in over eight
years. If at all possible, the Legislative leadership hopes to maintain
that record. And while overall tax collections were down for November,
sales tax collections were $900,000 above projections and personal
income taxes were $1.7 million above estimates, indicating the
potential for the beginning of an economic recovery.
I welcome and appreciate your input on these issues, or any other
legislative matter. Please call me at (304)340-3106 or write to
Delegate Virginia Mahan, 215-E, Capitol Complex, Charleston, WV 25305.