The final FY 2026 budget passed by the legislature during the 2025 legislative session closely resembled the budget introduced by Governor Morrisey back in February- largely flat from previous years with the impact of tax cuts and the ballooning cost of the Hope Scholarship crowding out many new investments. While the final budget was balanced as constitutionally required, there are significant budget gaps projected in the coming years as highlighted in the Morrisey Administration’s six year financial plan, and lawmakers are increasingly relying on one-time excess or surplus funds to cover ongoing budget costs, which could spell trouble when there are fewer or no surpluses. Meanwhile, longstanding needs like ensuring Medicaid solvency, filling public sector vacancies, funding school support positions, bringing down higher education costs, and increasing access to child care remain unaddressed.
The legislature passed a $5.73 billion base budget for FY 2026, which includes General Revenue and Lottery appropriations, with public education and Medicaid and Social Services the largest areas of the budget. Overall, spending is still significantly below pre-pandemic levels, adjusting for inflation. General Revenue spending is down $500 million, or nearly 10 percent in inflation-adjusted dollars, compared with FY 2019, which was $5.8 billion in 2024 dollars, compared to $5.3 billion for FY 2026.
Most areas of the final budget were unchanged from the Governor’s proposal. One notable change was for Public Defender Services. Public Defender Corporations were cut in the final budget by $1.4 million, from $26.7 million to $25.3 million, while Appointed Counsel Fees were cut by $15 million, from $32.7 million to $17.7 million. These funds are still expected to be needed, but lawmakers decided to fund the ongoing, annual services through a one-time supplemental.
In contrast, Tourism received a $7.25 million boost, increasing from $14.0 million to $21.25 million, while $3.0 million in new appropriations was added to the Division of Health for pregnancy centers. In higher education, a new appropriation of $1.5 million was added for the new Washington Center at West Virginia University.
The school aid formula also saw a small change, as a recalculation of the local share decreased the state’s share by $12.2 million.
The Department of Revenue saw an increased appropriation of $33.8 million above the governor’s proposed budget. This funding is to be directed to the Personal Income Tax Reserve Fund, essentially set aside for additional tax cuts, making it unavailable for any investment elsewhere in the budget, like in child care assistance, which has seen its state budget allocation cut in half since FY 2014.
Once again, the FY 2026 budget relies on one-time surplus dollars to fund a number of ongoing costs. In addition to Public Defender Services as highlighted above, the most notable example is for the Hope Scholarship. Only $24.6 million of the estimated $110 million FY 2026 cost of the program is funded through the Department of Education’s General Revenue appropriation. The remaining cost is funded through one-time supplementals, including $28.4 million from a General Revenue supplemental appropriation and a $33.8 million Lottery surplus appropriation. In FY 2027, when the program’s cost is expected to triple to $300 million, even more pressure will be placed on the budget due to relying on one-time funding to fund the program in FY 2026.
Fully funding ongoing Medicaid costs also relied on one-time supplementals, including $45.0 million from Excess Lottery surplus, $39.4 million from a General Revenue supplemental, and an additional $9.5 million from Excess Lottery surplus.
By using one-time dollars to cover these ongoing, base budget costs, state lawmakers are obscuring the true cost of state operations and programs. In total, one-time dollars used for ongoing, base budget costs in FY 2026 total at least $172 million across Public Defender Services, Medicaid, and the Hope Scholarship.
Governor Morrisey used his line item veto power to object to a number of budget line items, essentially making additional cuts to the budget. Notable reductions include reducing the new line item for Computer Science education from $2.0 million to $600,000, reducing funding for the Ronald McDonald House of Morgantown from $5.0 million to $2.0 million, and reducing the line item for Court Appointed Special Advocates from $1.1 million to $300,000.
The largest vetoes were in the surplus section of the budget. Both the Economic Development Project Fund ($75 million) and the Water Development Authority ($10 million) saw their line items reduced to $0. The Division of Highways saw two reductions of the $25 million, one from the Road Fund (from $700 million to $675 million), and one from the surplus section of the budget (from $125 million to $100 million).
With multiple rounds of tax cuts eating away at personal income tax revenue and the growing expense of the Hope Scholarship, many of the state’s needs that the governor’s proposed budget did not address remained unaddressed. A permanent solution to PEIA; restoring funding for child care; addressing public school safety, staffing needs, and rural school closures; and public employee pay raises were left out of the budget, while money was set aside for further tax cuts and the Hope Scholarship continues to grow. With deep budget gaps on the horizon, further neglect of necessary priorities that would truly improve the state remains likely.
