Late in the evening on the final day of the 2024 regular session, lawmakers passed what they referred to as a “skinny budget” totaling $4.997 billion in general revenue for FY 2025. The enacted budget reflects a spending increase of $122 million over FY 2024’s budget, but it is $226 million less than what the governor originally proposed and 12 percent, or over $700 million, less than the FY 2019 budget after adjusting for inflation.
Read the full FY 2025 budget analysis here.
After several years of essentially “flat” budgets, multiple crises have emerged including significant vacancies due to lack of competitive pay in Child Protective Services, public schools, and correctional facilities. And without adequate increases in state spending to keep up with rising costs to deliver services, more challenges are likely on the way as federal COVID relief dollars expire that were plugging holes in the state budget related to Medicaid, public schools, and child care. After adjusting for inflation, the FY 2025 budget is $716 million less than the FY 2019 budget.
The enacted budget came in $226 million below the governor’s proposed budget and $268 million below the FY 2025 revenue estimate, which is the amount of revenue the governor’s administration expects the state to bring in during the new fiscal year. While lawmakers pointed to uncertainty around a potential clawback of federal COVID education funds as a reason to set aside FY 2024 surplus dollars rather than allocate them, there was not much discussion about the logic behind underfunding the general revenue budget relative to the revenue estimate. The most likely explanation is that lawmakers are concerned about the uncertainty related to automatic tax cut triggers that could reduce revenues by over $200 million annually in the middle of the fiscal year, something the WVCBP warned could create dramatic budgeting challenges each year so long as the triggers remain in place.
Finance leaders in the Legislature repeatedly pointed to fiscal uncertainty as a reason to pass a budget significantly smaller than the governor’s proposal, which meant that many of his priorities did not make the final cut.
The biggest casualty of the “skinny budget” was the Medicaid program. While the governor’s budget contained increased appropriations as well as support for an increase in the tax on Managed Care Organizations (MCOs) to address rising costs due to inflation and the end of the increased pandemic-era federal match, the final budget enacted by the Legislature axed both of these proposals. As such, the FY 2025 enacted budget leaves Medicaid with an approximate $147 million state funding shortfall ($79 million in reduced base budget program allocations, $12 million in reduced administrative funding, and $56 million from the failure to pass the MCO tax increase). Because Medicaid is a state-federal matching program, each dollar reduction in state funds forfeits federal dollars. All told, the reduction in state Medicaid funding in the FY 2025 enacted budget compared with the governor’s budget proposal could reduce the total Medicaid budget by $628 million, or almost 12 percent of the entire Medicaid program.
