A weak September for General Revenue collections underscored the heavy price of 2023’s tax cuts on the state’s budget and should serve as a warning against Governor Justice and lawmakers moving ahead with even deeper cuts to revenue.
Weak September Numbers
September General Revenue collections totaled $567.7 million, which is $104.4 million below September 2023’s collections, marking a decline of 15.5 percent compared with the same month last year. Three months into the new fiscal year, overall collections are $111.0 million below FY 2024’s collections, a decline of 7.8 percent.
While Governor Justice has called a special session to consider a further five percent cut to the income tax just months after a four percent cut was triggered but not yet implemented, income tax collections specifically were particularly weak in September. They totaled $239.3 million, $81 million below last September’s collections, a drop of 25 percent. Overall income tax collections are down $74 million so far in FY 2025, compared to FY 2024, a drop of 12 percent.
While revenue collections are flat compared to the estimate, they are in a steep decline year over year. Compared to this point in FY 2023, General Revenue collections are down $220 million, or 14.4 percent, before adjusting for inflation.
Keep in mind 2023’s income tax cuts were in place for all of FY 2024, so additional losses in income tax collections into FY 2025 are worth noting. At the end of FY 2024, revenue officials and lawmakers touted that income tax collections had only declined 16 percent after a 21.25 percent cut, but an additional decline of 12 percent three months into the new fiscal year shows that the full impacts of the cuts are still being learned. Moreover, neither the property tax rebates that were part of the 2023 tax law nor the four percent triggered tax cut have gone into effect yet. Those will begin to impact collections in the second half of FY 2025, reducing collections by an additional estimated $280 million annually.
Other major sources of revenue are not making up the losses from the income tax as some proponents claimed would happen. Sales tax collections are up only $9.4 million, or 2.2 percent, so far in FY 2025, while severance tax collections are up only $1.7 million. Corporate net income tax collections are down $45.8 million compared to this point last fiscal year. All other taxes are up only $6.2 million.
Future Surpluses Unlikely
While tax collections are falling further behind last year’s numbers, they are largely on track with revenue estimates, coming in $1.2 million above estimates after three months. This means the low-balled estimates of years past that generated large year-end surpluses are likely no more. This too could raise concerns for lawmakers who have been increasingly reliant on surplus allocations to fund structural budget obligations that cannot fit into Governor Justice’s “flat budgets.” Just this year, lawmakers approved supplemental and surplus allocations to fund structural and ongoing obligations to the Hope Scholarship, Medicaid, the Department of Health, and the Department of Corrections and Rehabilitation. Without year-end surpluses, it is unclear how those ongoing budget obligations and unmet needs will be funded.
Mounting Spending Priorities
And after years of near-flat budgets, lawmakers returning in 2025 face a myriad of issues borne from underfunding programs, and likely need to consider raising revenue rather than reducing it–even in order to fund Republican spending priorities. Over the next two years, the Third Grade Success Act ($33 million) and Hope Scholarship (up to $200 million) will continue to increase as a cost to the state budget.
A new report from the National Education Association shows average teacher pay in West Virginia ranks 51st in the country, even after recent pay increases; thousands of families currently receiving child care subsidies are at risk of losing them if new state funds are not allocated to the program; and experts are urging the state to prioritize funding its Flood Resiliency Trust Fund, among other needs.
This month’s revenue report makes clear that the governor’s proposed additional tax cuts are likely unaffordable under current budget obligations and could create near-term issues in meeting existing spending needs- even before accounting for mounting unmet needs.
Read Sean’s full blog post.
In 2021, the West Virginia Legislature established the Hope Scholarship Program. West Virginia is one of many states offering school voucher programs, which divert public funds from public schools to private schools and other educational service providers both within and outside of the state. Extensive research supports that voucher programs have harmful impacts on funding for public education, but provides little evidence that these programs lead to improvements in student achievement and success.
Unlike other states with voucher programs like Wisconsin, Ohio, Georgia, and Indiana, West Virginia’s program has no caps on overall enrollment, cost of the program, or the household income of participating families. The Hope Scholarship began with some limited eligibility restrictions, but eligibility will be expanded to all West Virginia school-aged children beginning in the 2026-27 academic year, regardless of prior public school attendance.
In addition to a growing voucher program, there is also the reality of declining resources available for public schools as a result of aggressive tax cuts and the expiration of COVID-era federal relief funds. With relief funds having expired last month and additional tax cuts going into effect in January, public schools are in the precarious position of adjusting to reduced funding with even more financial uncertainty on the horizon.
Read Tamaya’s full fact sheet.
West Virginia has some of the worst birthing outcomes in the nation. Improving doula care accessibility in the state would provide well-documented health benefits to new parents and infants, significantly improve health outcomes, and reduce state costs.
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 that they feel comfortable and safe. Studies show that having doula support can improve both birth and post-birth outcomes.
Over the past several years, lawmakers have introduced legislation that would require the state’s Medicaid and/or PEIA programs to cover doula services. Legislation introduced during the 2023 West Virginia legislative session that would have extended doula services to Medicaid recipients was estimated to cost the state about $85,000 annually.
While West Virginia faces a relatively low cost to make doulas more accessible to families, the benefits are immediately apparent. The National Health Law Program (NHeLP) conducted a study that measured the cost-effectiveness of doula care coverage. It found that having a doula present throughout pregnancy and postpartum significantly improved birthing outcomes. These outcomes include fewer cesarean sections and pre-term births, as well as lower rates of postpartum depression and anxiety and higher rates of breastfeeding. Further, the study also found significant cost savings for health insurance providers that cover doula services.
The two most common birthing complications that NHeLP analyzed are cesarean sections (c-sections) and preterm births. The WVCBP analyzed potential savings to the West Virginia Medicaid program, concluding that having a doula coverage program could save the state at least one million dollars annually by reducing the likelihood of these occurrences.
Over one-third of babies born in West Virginia were delivered via c-section between 2018 and 2022, slightly higher than the national average. Having a doula present can reduce c-sections in low-risk pregnancies by providing education, avoiding inductions, and advocating on behalf of their patient. Preventing these procedures can reduce infant and maternal risks of injuries, hemorrhages, and embolisms. NHeLP found that doulas reduced the likelihood of a c-section by 40 percent compared to births without doulas. On average, c-section births cost Medicaid programs an additional $4,500 compared to vaginal births.
Between 2018 and 2022, just over 12 percent of infants born in West Virginia were born prematurely; roughly 70 percent of those babies had a low birth weight, which is a primary concern for preterm births. Preterm births and low birthweights caused 13 percent of infant deaths in the state in 2021. Roughly 17 percent of Black babies born in West Virginia had a low birth weight, compared to just nine percent of white babies. That same year, Black infants in West Virginia died at a rate 2.5 times higher than white infants.
Having a doula can reduce the number of preterm births and low birthweights by providing education and emotional support, both of which reduce anxiety and stress. Doulas are associated with a near-25 percent reduction in premature births. Medicaid programs pay over $40,000 in additional funds to ensure the wellness of these infants compared to full-term births.
In 2021, West Virginia’s Medicaid program covered the births of roughly 8,100 infants, representing nearly half of births across the state. Nationally, about six percent of pregnant people utilize doula services. Based on this estimation and the figures provided by NHeLP, West Virginia could have saved at least $927,000 in 2021 by covering doulas—nearly a three-to-one return on investment compared with the estimated cost of the program.
With more resources and education about the benefits of having a doula, West Virginia could save even more. If even one in five pregnant people sought doula care, it could amount to over $3 million in savings to the state Medicaid program annually, while costing less than $250,000 in state dollars.
To be clear, these estimates are conservative—they only account for direct savings associated with c-sections and preterm births. Accounting for factors like lost productivity, maternal and infant health complications, and other factors could generate significant additional savings. Still, these savings, alongside the well-documented health benefits, make it clear that implementing doula care would make West Virginia a better place for families.
Read Rhonda’s full blog post.
Last month, Gov. Jim Justice announced that legislators have had sufficient time to reach a consensus on his proposal to slash the state’s personal income tax for the third time in 18 months. In reality, the first two rounds of tax cuts have not even been fully phased in yet, and the state is already seeing historic revenue losses alongside major spending needs after years of austerity.
The West Virginia Center on Budget and Policy’s recent analysis finds that the change in tax revenues from FY 2023 to FY 2024 — driven in large part by 2023’s tax cuts — was the largest year-over-year revenue decline West Virginia has seen in 25 years, even outpacing the revenue losses during the Great Recession. And with about $310 million annually in already-enacted tax cuts still to be phased in, revenues will continue to drop, making it even more difficult for policymakers to address the state’s significant spending needs. Indeed, the Justice administration’s revenue department expects collections to decline another $500 million this fiscal year (FY 2025) compared with FY 2024.
But revenue losses are more than just numbers on paper — they mean there are fewer dollars to put toward funding for our public schools, health care, infrastructure and other public goods families and businesses rely upon.
The governor’s proposal would reduce state revenues even further — another $114 million annually. Senate Finance Chairman, Republican Eric Tarr described in July what lawmakers would have to do to offset a third reduction in the income tax after years of flat budgets that have already cut public services to the bone: “Either you’re going to have to go in and reduce spending that is so bloody that you can afford that — bloody by, I mean, it is going to be politically challenging and it will be citizen uproar on some of those services… [or] you’ve got to go find a tax somewhere else you’ve got to increase.”
That reality should raise significant concerns for policymakers who are considering the governor’s proposal of another five percent reduction in the personal income tax which, according to an analysis by the Institute for Taxation and Economic Policy (ITEP), would amount to about $1/week (or $53/year) for the average West Virginia household in their districts; meanwhile, the top 1% of wealthiest West Virginians would see about $2,100/year.
How much more bloody could the state budget become in exchange for $1/week for the average West Virginia family? We have already seen the impacts of the first round of tax cuts on state-funded programs: dozens of child care centers and family care homes closed already this year, leading to hundreds of families losing access to the child care they need in order to work.
New data shows that West Virginia ranks last in the country for teacher pay even after recent pay raises (though those were often consumed by increased PEIA costs). Teacher pay has a significant impact on families with children in our public schools, particularly those in border counties where teachers can often drive just a few miles to see their salaries jump dramatically or even double.
Emergency Medical Services (EMS) providers are warning that their response times are being hindered by a lack of steady funding, which has had catastrophic and even deadly impacts in rural parts of the state. In addition to the literal life or death implications of the issue, emergency response times also impact the cost of homeowners insurance premiums.
Each of these examples are a result of policy choices to prioritize income tax cuts — two-thirds of which have gone to the wealthiest 20 percent of households — over investing in public services that support all families and grow our economy.
For families who have lost their child care provider or are at risk of losing their child care subsidy, $1 per week won’t mean much. Nor will it for members of a community facing school consolidation or teacher shortages, or for an individual who loses a loved one because the ambulance could not arrive in time to save them. Further, households whose homeowners insurance have increased exponentially as fire and emergency response times lagged will likely pay out considerably more in new insurance costs than the $1/week they gain.
While “tax cuts” in a vacuum might poll well, Justice and state legislators have a responsibility to the West Virginians they serve to be honest about their bloody costs — which are always passed on to households to bear when public services decline.
Read Kelly’s full op-ed.
This week, West Virginia lawmakers convened for a special session called by Governor Justice. Among other items, lawmakers are expected to consider the governor’s income tax proposal, which has generated significant concern regarding the ongoing financial stability of the state. A recent article, including comment from WVCBP executive director Kelly Allen, provides further details. Excerpt below:
Gov. Jim Justice expressed optimism that an additional personal income tax cut that he’s been pushing for weeks could still be embraced by the state Legislature.
Lawmakers went into a special session called by the governor on Monday but adjourned until this coming Sunday without taking up his tax cut proposal. Many lawmakers have expressed caution about whether the state is in solid enough financial shape at this time to absorb the additional cut.
This tax cut would be on top of a 21.25% income tax cut that just went into effect, plus another 4% tax cut that will occur automatically because the state hit an economic trigger. Justice has called for 5% more, although today he said the particular figure doesn’t matter as much as the state demonstrating that it’s steadily whittling away the income tax.
The additional 5% personal income tax cut is estimated to equate to about $110 million that would not be available to pay for the expenses of state government.
One day after lawmakers adjourned without a decision on the tax cut, state officials released new monthly financial figures showing the flow of state revenue remains fairly flat.
Lawmakers have generally expressed caution about the governor’s 5% tax cut proposal because other tax cuts are still going into effect and because there are additional spending commitments also still going into effect — like the continued rollout of the Third Grade Success Act and estimated additional costs for more Hope Scholarship enrollment.
Kelly Allen, executive director of the West Virginia Center on Budget & Policy think tank, said the state revenue trends don’t justify another tax cut. She compared the recent figures to prior-year collections.
“September’s revenue report shows that we are still learning the full impacts of 2023’s tax cuts. After declining by 16 percent in FY 2024, income tax collections are down another 12 percent compared with this point last year—and that’s before the triggered tax cut and property tax rebates have begun to impact collections,” Allen said.
“Given the significant obligations our state faces — from funding for child care and schools to flood preparedness — this report makes clear lawmakers should pump the brakes on additional cuts and focus on meeting the needs of our people.”
Read the full article.
The Black Voter Impact Initiative and Black by God, the founders of West Virginia’s Black Policy Day, are hosting an exciting webinar series focused on specific aspects of the Black Policy Agenda. This is an excellent opportunity to deepen your knowledge and engage with experts across various issue areas ahead of the 2025 West Virginia legislative session.
You can register for the webinar series here.
You can share what you would like to see prioritized in the Black Policy Agenda by filling out this survey.
Mark your calendars for Black Policy Day 2025, which will take place on March 10, 2025.
The current system of reimbursing child care providers in West Virginia is based on the attendance of the child, not their enrollment. This approach often leaves providers at a financial disadvantage when children are absent due to illness or other reasons.
According to the National Association for the Education of Young Children, stable funding based on enrollment rather than attendance can provide more predictable income for providers and support higher quality care. By adopting this approach, we can ensure that our child care providers continue offering their invaluable services without worrying about inconsistent finances.
Please join us in signing this petition and helping us advocate for a fairer reimbursement system for our West Virginia child care providers.
