West Virginia ended Fiscal Year (FY) 2022 with revenues coming in at $1.3 billion above estimates. And while that surplus is largely a mirage built on low revenue estimates, unexpectedly high energy prices, and unprecedented amounts of federal aid and budget support, it does present an opportunity to make much-needed investments in the people of West Virginia while address longstanding needs.
Three-fifths of the revenue surplus, $793 million, was already appropriated by the Legislature as part of the FY 2023 budget. The bulk of that $793 million went into funds that are largely unaccountable to legislators or the public, including $600 million to the Department of Economic Development for the Industrial Development Loans Fund and $50 million to the Mining Mutual Insurance Program to cover bonding costs for coal companies. Only $42.6 million, or five percent of the surplus, was appropriated to programs and services that directly benefit West Virginia residents.
Prior to this year, the governor’s administration was required to deposit 50 percent of any surplus funds unappropriated at the end of the fiscal year into the state’s Revenue Shortfall Reserve (Rainy Day) Funds. SB 487 was passed earlier this year, waiving that requirement when the Rainy Day Fund is equal to or exceeding 20 percent of the state’s General Revenue Fund budget for the fiscal year that just ended. With $957.3 million in the state’s Rainy Day Funds as of May, and a flat General Revenue budget of $4.495 billion, none of the FY 2022 surplus will have to be deposited into the Rainy Day Fund.
That leaves just over $500 million remaining that lawmakers will have the opportunity to allocate. Unfortunately, both the governor and legislative leadership are using the surplus to argue once again for inequitable and permanent tax cuts despite the surplus being a one-time source of money. Governor Justice has again proposed an ineffective income tax cut that would largely benefit the wealthy, while Senate leadership continues to call for an ineffective property tax cut that would largely benefit out of state businesses; both proposals would deprive the state of resources to address real needs and make needed investments, while failing to have a significant impact on the vast majority of West Virginia households. Considering half of the total surplus has already gone to corporate and business interests, it is time for lawmakers to prioritize our state’s families.
Here are five proposals West Virginia lawmakers should consider to support workers and families, all of which could be funded by the state’s remaining $515 million revenue surplus from FY 2022:
Invest in PEIA to avoid enrollee cost increases. At a June board meeting, PEIA officials shared that the insurance program is $61 million behind budget due to increased costs and a shortfall in expected revenues. Additionally, PEIA needs an additional $50 million each year above the prior year’s budget to cover the costs of annual medical and drug inflation. Despite that reality, lawmakers have never implemented a permanent funding solution for PEIA. While one-time funding does not address the need for a permanent solution, lawmakers could utilize $150 million of the remaining FY 2022 surplus to cover this year’s shortfall and ensure that PEIA enrollees do not see a cost increase due to standard medical inflation through 2024.
Provide an additional 10,000 children with subsidized child care. Since most families need child care to participate in the workforce, it is imperative for families and our economy that such care is affordable. Unfortunately, current child care funding only allows West Virginia to provide subsidies to about one in four families who meet income requirements for financial assistance. Prior to the American Rescue Plan Act’s (ARPA) investments, West Virginia served about 11,000 children with child care subsidies, down from just over 21,000 children in 2001. In 2021, child care subsidies averaged about $5,744 per child. With a $57.4 million investment, West Virginia could serve an additional 10,000 children, getting back to 2001 program numbers and ensuring more parents can balance work and child care. While $57 million would only provide a single year of increased subsidies, it would protect gains from ARPA that are at risk of being lost and give lawmakers the opportunity to find a way to more permanently fund the additional slots.
Enact a paid family and medical leave program for all workers. A lack of paid family and medical leave has a significant negative impact on workforce participation, particularly among women and older workers, who often have no job protections if they have a new child or need time off for a serious illness or to care for a seriously ill family member. Currently in West Virginia, nearly four out of five workers lack access to paid leave. In addition to being a pro-family and pro-work policy that would ensure no one has to choose between their job and caring for a loved one, a paid family and medical leave program would have vast positive impacts on our state’s economy and workforce. If women participated in the labor force at the same rate as women in countries with paid leave, there would be an additional 30,000 workers in the state and $1.1 billion more in wages earned statewide annually.
Paid family and medical leave programs are generally funded like insurance programs, where workers and employers pay a small amount into an insurance fund that is then used to cover a worker’s salary when they need paid time off. Because of that, a statewide paid leave policy would be self-sustaining with no cost to the state. That said, for $150 million, West Virginia could get the program off the ground and cover the first year of benefits while premiums start to come in to fund the program in perpetuity.
Invest in workforce development. Earlier this year, Workforce WV leadership testified that job readiness is one of the top three issues that keeps West Virginians out of the workforce. The FY 2022 surplus presents an opportunity for West Virginia lawmakers to invest in workforce development to ensure that West Virginians have the skills needed to support their families and attract business investment. The state of Oregon did just that by investing a portion of their 2022 budget surplus in workforce development programs, including customized job training, investments in local workforce boards, community college career pathways, competitive workforce readiness grants, and industry-specific training pilots. Additionally, they paired state revenue surplus dollars with ARPA funds to maximize their investment. West Virginia lawmakers could invest $50 million of revenue surplus along with remaining ARPA funds into workforce development efforts to address job readiness and help grow our economy for the next generation.
Give all children a one-time $250 tax credit. Current tax cut proposals like the governor’s proposed personal income tax cut fail to prioritize low- and middle-income families who need support the most, instead giving the largest tax cuts to the wealthiest households in the state. Research shows that families who received the enhanced Child Tax Credit (CTC) included in the ARPA overwhelmingly used the funds to pay for basic household needs. Further, the CTC led to historic reductions in child poverty. While a permanent state-level CTC would be preferable, a permanent funding source would need to be identified to make this a reality. For now, state lawmakers could invest $100 million in remaining FY 22 surplus to provide a one-time tax credit of $250 to every child in the state to address the rising costs of raising a family.