The Register-Herald, Beckley, West Virginia

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February 14, 2013

Proposed $4.6 billion budget includes penny-pinching, but no tax increases

CHARLESTON — Medicaid spending, saddled with a decline in coal mining and a generally anemic economy, prompted Gov. Earl Ray Tomblin to produce a proposed $4.6 billion state budget Wednesday that calls for no tax increases but relies on penny-pinching in government.

Using a variety of graphs, budget director Mike McKown told reporters the administration must come up with an extra $142 million to maintain current Medicaid spending, since the state’s share has gone up to 29 percent.

“The big driver is Medicaid,” he said.

Another point of financial pressure was the need to scarf up $41 million more to fund the retirement programs.

And that, he explained, is why Tomblin called on a 7.5 percent rollback late last year in spending by state agencies, a drop that was met without furloughs and layoffs.

“We started the budget process with a $389 million gap,” he noted.

Looking into the succeeding year, that has been zeroed out and no further gaps are anticipated.

Deputy Revenue Secretary Mark Muchow said little or no revenue growth is projected in the coming year.

“There’s a greater chance of revenue decline than there is growth,” he said.

As coal production falls, and many states phase out coal-fired electricity generating plants, Muchow suggested things could get even bleaker for the industry.

Last December, there were 5,000 fewer jobs than in the previous year, but on the positive side, employment is up in manufacturing, the retail sector, construction, transportation and local government.

“We will have a negative employment growth of .3 percent in 2013 due to the mining sector,” Muchow said.

“We are an energy producing state. We live and die by energy.”

In fact, he noted, coal was the fastest growing part of West Virginia’s economy over the past decade.

Coal production is about 8 percent lower than last year’s pace, but on the positive side, exports are up some 17 percent compared to the previous year, he said.

About 8.5 percent of the coal-fired plants in the country will be shut down between now and 2016 and that will have an impact on the economy, he said.

“If you were to put up a bull’s-eye, the center of the bull’s-eye would be West Virginia,” Muchow said.

General revenue intake went into a nosedive in 2010, McKown noted, saying, “You can see what a recession does to collections.”

The base budget of $4.5 billion is padded with lottery money but that source shows signs of turning “flat” over the six-year plan.

“We’ve peaked out in the lottery,” McKown said, explaining that this source has fallen due to the general state of the economy and competition from adjoining states.

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