Governor Justice has once again touted the state’s so-called “surplus” as reason to pursue more tax cuts favoring the wealthy. But make no mistake, the state’s surplus isn’t a sign of uncharacteristically strong revenue growth, or a sign that the state’s needs are all being met. Instead, the surplus has been largely manufactured by artificially low revenue estimates, unexpectedly high energy prices, and a flat budget that is ignoring state needs. Further, there are indications that revenue growth is starting to slow, which should be a strong sign to any tax-cut-hungry lawmakers to pursue those cuts cautiously.
As of December 2022, West Virginia’s FY 2024 budget is running a healthy surplus, with revenue collections exceeding estimates by $833 million. But just like last year, those revenue estimates were set to be artificially low, designed to create the illusion of a surplus.
The FY 2023 revenue estimate of $4.6 billion is $1.2 billion below actual collections in FY 2022 and $120 million below actual collections in FY 2019. That means one of two things: either the administration unreasonably expected an economic collapse in FY 2023 that would wipe out four years of growth, or the revenue estimate was intentionally low-balled to manufacture a surplus.
What’s more, the majority of the current $833 million surplus is from severance tax collections, which are being boosted by a temporary surge in energy prices, along with the low revenue estimates. Severance tax collections in FY 2022 totaled $768.8 million, but the estimate for FY 2023 is only $250 million. The combined impact of that artificially low revenue estimate and surging energy prices is that the severance tax is coming in at $433.5 million above the estimate as of December 2022, accounting for 52 percent of the $833 million surplus. To put that in perspective, in the FY 2023 revenue estimate, the severance tax was only predicted to account for 5.4 percent of total revenue.
Aside from the severance tax, the other main sources of state revenue–the personal income tax, the sales and use tax, and the corporate net income tax–are barely outperforming last fiscal year’s collections, after adjusting for inflation, and have actually fallen behind in recent months.
While total FY 2023 collections are $833 million above the low-balled revenue estimate, personal income tax, sales and use tax, and corporate net income tax collections are only $54.7 million above FY 2022 collections, after adjusting for inflation. And revenue collections are showing signs of slowing down compared to last year.
With so much of West Virginia’s surplus built on artificially low revenue estimates and volatile severance tax collections–and while other sources of revenue are beginning to slow–using the “surplus” to justify tax cuts is fiscally irresponsible.
Read Sean’s full blog post.
If West Virginia is currently enjoying “historic budget surpluses” as repeatedly touted by public officials, why is the state experiencing numerous funding crises and neglecting necessary investments in critical public services?
Join us on Facebook Monday, Jan. 9 as our team breaks it all down. Our senior policy analyst and policy outreach director will be starting the Facebook Live at 7:00pm. Their analysis and discussion will be followed by time for Q&A.
If you’re looking for an informed lay of the economic landscape ahead of the start of the 2023 legislative session later next week, this presentation is for you. We hope to see you there!
Find our Facebook page here.
West Virginia’s Public Employees Insurance system (PEIA) will soon face a $376 million dollar shortfall due to years of state neglect. Lawmakers have indicated they plan to tackle the shortfall this legislative session. Our new blog post explores the options (some preferable to others) that may be under consideration.
According to the latest projections, PEIA costs for the state will dramatically increase over the next five years. Rather than being a sign that PEIA itself is unsustainable, the growing costs are a result of years of flat budgets that have failed to keep up with annual medical inflation. In FY 2025, PEIA is projected to face a $204 million shortfall, followed by a $283.5 million shortfall in FY 2026, and a $376.5 million shortfall in FY 2027.
The options (again, some preferable to others) that have been suggested in recent years by policymakers and advocates to address the long-term sustainability of PEIA include:
– increasing state budget appropriations
– increasing premiums
– reducing benefits
– privatizing PEIA
Addressing PEIA’s solvency must be a priority for legislators in the upcoming legislative session. West Virginians and policymakers cannot afford to keep punting this decision down the road, thereby creating an even larger cliff. The solution should ensure that the state not make benefits less generous for current or prospective employees and not enact policies that raise costs on workers and families. Right now, the state is enjoying revenue surpluses, which are in some part due to four years of flat budgets that did not keep up with the growing costs of goods and services or the needs of our state’s people. Lawmakers can invest some of the surplus revenue in ensuring that our state’s public employee insurance system remains strong for the future.
Read Sean’s full blog post.
As the 2023 legislative session approach, the West Virginia Center on Budget and Policy staff would like to invite you to join us at our 10th annual Budget Breakfast, taking place on January 20, 2023.
Each year, the WVCBP holds this event to provide analysis of the Governor’s proposed budget. You’ll hear from our executive director, Kelly Allen, our senior policy analyst, Sean O’Leary, and our chosen keynote speaker, to be announced closer to the event.
Please find further event details below. You can register for the event here.
WHAT: WVCBP’s 10th Annual Budget Breakfast
WHEN: January 20, 2023. Breakfast will be available starting at 7:30am. The WVCBP’s analysis of the Governor’s 2024 proposed budget will begin at 8am, followed by keynote speaker presentation and time for Q&A.
WHERE: Charleston Marriott Town Center (200 Lee Street East, Charleston, WV 25301)
We appreciate your ongoing support of the WVCBP and we hope you can join us at next year’s event!
The WVCBP’s Elevating the Medicaid Enrollment Experience (EMEE) Voices Project seeks to collect stories from West Virginians who have struggled to access Medicaid across the state. Being conducted in partnership with West Virginians for Affordable Health Care, EMEE Voices will gather insight to inform which Medicaid barriers are most pertinent to West Virginians, specifically people of color.
Do you have a Medicaid experience to share? We’d appreciate your insight. Just fill out the contact form on this webpage and we’ll reach out to you soon. We look forward to learning from you!
You can watch WVCBP’s health policy analyst Rhonda Rogombé and West Virginians for Affordable Health Care’s Mariah Plante further break down the project and its goals in this FB Live.
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