West Virginia’s new governor, Patrick Morrisey, has called for a “backyard brawl” with our neighboring states to ensure West Virginia has the most competitive possible environment to attract people to our state. Up to this point, that has centered almost exclusively on cutting taxes and deregulation as a means of attracting people and businesses. While often left out of the conversation, West Virginia’s public investments, the services and amenities offered to families and businesses, are just as integral to understanding what draws people to a place.
Our new report released this week, Improving West Virginia’s Competitiveness: How the Mountain State Matches Up With Our Region Where It Matters Most, takes a look at how West Virginia’s tax system and the investments we make with those tax dollars compare with our neighbors. We find that, while West Virginia’s tax system already compares favorably with our neighboring states, it is upside-down, with the bottom 80 percent of households paying more in taxes as a share of income than the top 20 percent.
Where West Virginia does fall short compared with our region is in per capita spending in the state budget for various essential programs and services, including child care assistance, public education, Medicaid, and other critical programs that serve families and grow our state’s economy. State spending on these programs has fallen behind after years of tax cuts and flat budgets. Tax cuts that undermine the state’s ability to provide high-quality public services can have the opposite of their intended effect, making our state less attractive to families and businesses.
During the upcoming legislative session, lawmakers have the opportunity to rebalance our tax system and reprioritize funding the critical programs where West Virginia has fallen behind our neighbors. By raising revenue, West Virginia can simultaneously increase our standing among the states in our region and better serve the families and businesses who already live here. Doing so will improve the lives of the vast majority of households in our state, while the revenue raised will impact very few households and big industries and corporations.
To raise new state revenue to fund vital public services, co-authors Sean O’Leary and Kelly Allen propose modernizing West Virginia’s personal income tax brackets and enacting a state-level Earned Income Tax Credit, which would on average provide a tax cut to 60 percent of West Virginians and would not raise taxes on any households making under $100,000. These new funds can help strengthen Medicaid and PEIA, increase funding for child care assistance and public school districts, and provide critical revenue for other priorities lawmakers enter the 2025 legislative session with.
Key Findings
Read Sean and Kelly’s full report here.
Federal dollars support a wide array of public services and systems that touch the lives of all West Virginians — from health care and food assistance to child care and public schools. Under both the Trump Administration and Congress, many of these programs are being considered for deep cuts or significant reductions — in large part to pay for extensions of tax cuts that mostly benefit corporations and the wealthy. Cuts to federal funding would have a disproportionately harmful impact in West Virginia, a state that funds a larger share of its budget through federal dollars than most, devastating vital services that advance health coverage for children, people with disabilities, and the elderly; provide school meals and disability accommodations in public schools; and support workforce development, public health, and state infrastructure.
Emerging proposals from the Trump Administration, Project 2025, and key congressional leaders threaten to drastically reduce federal funding for programs that West Virginians rely on, which would shift significant costs and difficult decisions to state policymakers. This cost-shifting would force state leaders to either replace lost federal funding with state revenue (just as the state is facing its own budget crisis) or drastically cut benefits and services to their constituents, likely creating significant harmful impacts on residents and the state’s broader economy.
How Federal Funds Support West Virginia’s State Budget and Programs
A significant share of federal funding for West Virginia flows through the state budget. For the current fiscal year (FY 2025), West Virginia’s enacted budget includes $9.63 billion in federal funding, representing over 50 percent of the state’s total $19.2 billion budget. Nearly all of this funding is for permanent programs. While recent years temporarily saw higher federal funding for pandemic aid, nearly all of that has been exhausted and what remains is primarily regular federal funding.
West Virginia is more reliant on federal funding than most states at 50.15 percent of its total FY 2025 budget. On average, federal funds comprise about one-third of states’ annual spending.
Medicaid accounts for a significant percentage of the state’s federal funding, with anticipated federal funding of $4.1 billion in FY 2025. The FY 2025 state budget anticipates $5.3 billion in federal dollars to flow to the Department of Human Services, which in addition to Medicaid, also administers the Child Care and Development Block Grant, Temporary Assistance for Needy Families (TANF), the Low-income Home Energy Assistance Program (LIHEAP), and child welfare, foster care, and adoption programs.
Other significant sources of federal funding to West Virginia flow to early childhood and public assistance programs, economic development, environment, and K-12 education. Based on the public positions of the Trump campaign, Congressional leadership, and the policy positions described in Project 2025, many of these programs are at risk of reduced or eliminated funding.
Funding Threats
Medicaid is West Virginia’s largest program in terms of funding and is expected to be among those most vulnerable to changes in federal funding and policy in 2025. A number of proposals have been floated to reduce federal spending on Medicaid including block grants and spending limits, per capita caps, and onerous bureaucratic proposals including work reporting requirements.
In FY 2023, Medicaid spending in West Virginia totaled $5.427 billion, with $4.443 billion, or 82 percent of the program, coming from federal dollars. Medicaid provides health coverage for just over 500,000 West Virginians, or nearly one-third of the state’s population, and is the largest source of coverage for births, child health care, substance use treatment, and long-term care for West Virginians benefiting those across the state’s population. It is also vital to our state’s hospitals and providers, with research showing Medicaid expansion has resulted in reduced uncompensated care, increases in hospital operating margins, and decreases in closures of hospitals and obstetrics units. Medicaid improves hospital finances by extending coverage to patients who would otherwise be uninsured and require hospital charity or uncompensated care.
In all proposals outlined above, federal funds to the state would decrease by hundreds of millions of dollars, shifting the costs of providing health care for low-income residents onto state policymakers, health care providers, and families themselves. The WVCBP estimates that work reporting requirements on non-elderly adults under the Medicaid expansion population only could cause an estimated 40,000 residents to lose health coverage, reduce federal funding to West Virginia by more than $240 million annually, and cost nearly 4,500 jobs in the health care and other sectors. Per capita spending caps would also dramatically reduce federal funding to the state, with an analysis showing that had they been enacted in 2018, the state would have lost $469 million in federal funding in FY 2022 alone.
The Trump Administration and congressional Republicans have also proposed to decrease or divert federal funding in several other policy areas — including for K-12 public education — which could have significant harmful impacts in West Virginia, where child care assistance funding falls short of need. The state has a considerable funding gap in providing special education services with existing federal dollars, and child welfare outcomes are the worst in the country.
Other services are also at risk, including some that are funded with federal dollars that flow directly to West Virginians outside of the state budget — such as federal food assistance provided through the state’s SNAP program and federal Supplemental Security Income (SSI) payments for low-income seniors and people with disabilities.
Additionally, nonprofit and state entities are already experiencing disruptions, pauses, and uncertainty in federal grant programs they administer given the Trump Administration’s pause and subsequent chaos related to vital federal grant programs.
To be clear, any proposal to freeze, cut, or divert federal funding would shift costs onto West Virginia, at a time when funding for existing state programs is already in doubt. West Virginia, a state more reliant on federal dollars than most, would be disproportionately harmed by any of these proposals.
Read Kelly’s full blog post.
Read this recent op-ed for further details about how cuts to Medicaid would negatively impact West Virginia.
West Virginia families deserve healthy and safe birthing outcomes, but moms and babies are currently facing significant health challenges. While much discussion is rightly focused on mortality rates, deaths are only the tip of the iceberg of infant and maternal health and well-being. Birthing complications, including pre-term births and caesarian sections, incur a significant cost to families and the state each year. Beyond a physical and mental toll, they also cost the state Medicaid program millions of dollars annually in more complicated births and lengthier hospital stays. These complications are often preventable. One way to improve all aspects of infant and maternal health is by widening access to doula care and midwifery.
Doulas are trained birth workers who provide non-medical support throughout pregnancy, during childbirth, and after the end of pregnancy. They act as support for pregnant persons, ensuring that their questions are answered, their needs and desires are represented, and they feel comfortable and safe.
Meanwhile, certified professional midwives (CPMs) are health care providers trained to provide medical services during and after pregnancy and childbirth. They work alongside hospitals, and often doulas, to provide holistic care services to support healthy pregnancies.
Studies show that having a doula and/or midwife can improve pregnancy, birth, and post-birth outcomes. It can also mitigate racial and regional disparities in birthing outcomes across West Virginia, which has worse outcomes than the United States average.
As obstetrics and gynecology hospital units continue to close across the state, increasing access to caregivers like doulas and midwives becomes increasingly important. They can bring health care to families that may otherwise lack access for a myriad of reasons. In 2006, West Virginia had 35 obstetrics and gynecology hospital units across the state. In 2024, there were 20, with significant swaths of the state having no units at all. This has contributed to longer travel times to maternity care providers and delivery centers, which can be logistically challenging due to lack of transportation, child care, flexible work hours, and other factors. March of Dimes found that living in a maternal care desert decreases the likelihood of receiving prenatal care and increases the risk of a pre-term birth by 13 percent.
Providing doula coverage in Medicaid pays for itself multiple times over nearly immediately via reduced c-sections and pre-term births. The WVCBP’s analysis shows a cost-savings of 2.5 times the cost at any utilization level. For instance, if doulas assisted one in five Medicaid-covered pregnancies, West Virginia could save over $1 million annually while spending less than $400,000 and simultaneously improve birthing outcomes across the state.
West Virginia is one of just 12 states that do not have a path to licensure for Certified Professional Midwives (CPMs). Enacting legislation to give CPMs this path to licensure would increase access to maternal care throughout the state and strengthen the health workforce.
Studies show having a doula and/or midwife present throughout pregnancy and postpartum significantly improved birthing outcomes. These outcomes include fewer c-sections and pre-term births, as well as lower rates of postpartum depression and anxiety and higher rates of breastfeeding.
See Rhonda’s full fact sheet for the most recent county level c-section and pre-term birth data, as well as estimated annual cost savings associated with implementing doula care.
It was recently revealed that West Virginia is expected to face a $400 million budget deficit for Fiscal Year 2026. This will create numerous budgetary challenges for the state, impeding its ability to fund essential public services. Despite this, Gov. Morrissey announced last week that he does not intend to use the state’s emergency funds to close this budget hole. A recent article, including comment from WVCBP senior policy analyst Sean O’Leary, provides further details. Excerpt below:
During a press conference about a possible $400 million shortfall in the state budget, Gov. Patrick Morrisey said he won’t raise taxes. In fact, he intends to continue cutting them.
Part of that $400 million hole includes the state having to come up with $153 million to cover Medicaid, a program that ensures access to doctors, hospitals and life-saving treatment for nearly one-third of all West Virginians.
But the state has $400 million set aside in a special fund to cover shortfalls – and another $1.3 billion in the Rainy Day Fund.
Morrisey said he doesn’t want to use that money.
So that leaves cuts. But the cuts could result in dialing back programs for some of the state’s most vulnerable citizens, Sean O’Leary, an analyst with the West Virginia Center on Budget and Policy noted.
“Everything from schools to parks to infrastructure, all of that stuff is at risk – healthcare, particularly for low income individuals,” he said.
While Morrisey took his predecessor Gov. Jim Justice’s practice of using a whiteboard to discuss the state’s finances, he laid much of the blame at the now-Senator’s feet. He said years of relying on an influx of federal dollars due to COVID, low-balled estimates on the cost of doing business, and using “one shot money” to fund programs, has put the state coffers in this position.
Back in 2023, when the Legislature passed a 21.25% tax cut, it also set aside $400 million into the Personal Income Tax Reserve Fund. This fund makes sure the state has cash on hand to pay out refunds when tax season comes.
Anything over and above that – like the $400 million the Legislature approved – can be used in the state budget.
Justice touted that money as a safety measure in case tax cuts caused the state revenue to run too lean.
But Morrisey said using that money would just delay fixing the problem for the next three or four years.
O’Leary is largely in agreement with the governor on this point.
“You can’t use one time fixes for a structural deficit, because they just reappear the next year,” he said.
Morrisey has not yet identified where he will make up the shortfall. The Governor will submit his first budget to the Legislature on Feb. 12, when he delivers his State of the State Address.
Read the full article.
Join the WVCBP for our second annual Budget and Bites event!
This convening will be held at the WV School Service Personnel Association Convention Center on Wednesday, February 19, 2025. Tickets include appetizers and drinks, available from 4:00-6:30 pm. Please note, registration is required. You can find event registration here.
The program begins at 5:00 with opening remarks by Kelly Allen, WVCBP’s executive director. Following, senior policy analyst, Sean O’Leary, will give a brief analysis of the Governor’s 2026 budget. You’ll also hear from other members of the WVCBP team and coalition partners about the budget impact on West Virginians.
Stay to mix and mingle, get information about upcoming budget priorities, and learn more about the Center and our team. Come and stay or drop in for short conversation in a laid-back pub atmosphere.
To become an event sponsor, email event coordinator, Krysta Rexrode Wolfe, or fill out the sponsorship form here.
The fourth annual Black Policy Day is scheduled for March 10, 2025 at the State Capitol in Charleston, West Virginia. Founded by Black Voter Impact Initiative and Black by God, Black Policy Day brings together hundreds of Black West Virginians from all over the state to advance civic engagement, raise collective understanding of the decisions made by state lawmakers, and advocate for policies from the community-sourced Black Policy Agenda.
You can register for the event free of charge or become a Black Policy Day sponsor here. Please see the yellow flyer below for further details.
You can register for the accompanying webinar series here.
You can share what you would like to see prioritized in the Black Policy Agenda by filling out this survey.
You can view the recording of Young, Gifted, and Black, a webinar highlighting emerging Black policymakers and advocates who are shaping the future of the Mountain State, here.
