The Register-Herald, Beckley, West Virginia

January 9, 2014

Governor’s budget dips into Rainy Day Fund

By Pamela Pritt
Register-Herald Reporter

CHARLESTON — Polar vortex? It might be cold outside, but the economic forecast is, it’s raining in West Virginia.

Bob Kiss, secretary of the Department of Revenue, said the governor’s budget will include a one-time appropriation from the state’s Rainy Day Fund. Kiss said $83.8 million from that fund will be moved to Medicaid.

The secretary said the transfer — one piece of $148 million in one-time appropriations — is not because of Medicaid expansion, which the Legislature approved last year. Expansion of Medicaid is “paid for entirely by the federal government for the first few years,” Kiss said.

Kiss said the budget is austere, and the next couple of years will be tight fiscally. But, he said, the state is far better off than it was in 1989 because of the nearly $1 billion in the Rainy Day Fund now in place and fully funded. The fund has never before been accessed for revenue stabilization.

“We’re not going to be able to do some of the things we might want to do,” Kiss said. “We need to continue to be austere; we need to continue to be prudent. And we believe accessing the Rainy Day Fund does not jeopardize the economic progress the state has made, nor does it jeopardize the way financial analysts view the state.”

The Rainy Day Fund, 22 percent of the general budget, is funded automatically; half of all surpluses go to the fund. Kiss said West Virginia is one of the few states to do this.

The budget does provide a 2 percent raise for teachers and a $504 annual raise for state employees. Also, the budget does not call for teacher or state employee layoffs or furloughs. Teachers and other state workers last got a raise in 2012.

Public education is 46 percent of the $4.2 billion budget.

The governor’s budget reflects 7.5 percent in cuts. Kiss did not explain which agencies or programs would be cut, but did say certain agencies and programs are exempt. Public Education, Corrections, Juvenile Services, Medicaid and the legislative and executive branches of state government, amounting to some 75 percent of the budget, all have immunity.

Grant programs for higher education were also exempted, as was miners health and safety.

“Those that remain on the table will have deeper cuts,” Kiss said.

The state will see increasingly smaller budget shortfalls over the next two fiscal years, and after that, the economic climate improves, Kiss said, and by 2018, with keeping the current cuts in place, the state will be financially solvent.

Kiss said this budget is not only balanced, but provides a better structure for future budgets, as well.

Deputy Secretary of Revenue Mark Muchow said the forecast for the state has good and bad news, including that the wood products manufacturing sector is poised for recovery after taking a severe hit from the latest recession.

The bad news, he said, is that the coal industry is declining, with production down 4 percent, and Baby Boomers are now becoming senior citizens.

Muchow noted that federal sequestration is ending this year, which should mean some “fiscal headwind,” since a portion of the budget is funded by federal dollars. Property tax grew, as well, he said, mostly in counties with Marcellus shale gas production.

The budget calls for no tax increases or fees.