Charleston Gazette-Mail – While West Virginia has avoided major budget problems, so far, it is unlikely to continue as several billion dollars in federal aid dries up and the economic reality of the pandemic-induced recession continues to put downward pressure on state and local budgets. Link to op-ed here.
Policymakers would be wise to take this time to plan accordingly, ensuring all federal aid is used appropriately and we don’t further depress our state’s economy with public-sector layoffs and disinvestments in colleges, schools and communities. These challenging economic times only will become harder if our response is to ignore and choke off revenue to hospitals, schools, small businesses, teachers and first responders — all the indispensable people and services that make our communities thrive.
Despite having more than 117,000 West Virginians out of work (by April’s figures), the state general fund revenue is only about $236 million, or 6%, below estimates, as of the end of May. Gov. Jim Justice previously estimated the budget would have a $500 million gap by the end of the fiscal year (June 30).
The central reason for the state’s smaller-than-expected revenue shortfall is because of more than $2 billion in federal aid from the CARES Act that has been injected into the economy in April and May, including the $1,200 individual stimulus checks, $600 in additional weekly unemployment benefits and paycheck protection program loans to small businesses.
The budget also has been helped by the increase in federal Medicaid funding contained in the Families First Act that passed in mid-March.
The CARES Act that passed Congress two months ago contained $1.25 billion that West Virginia’s state and local governments could use to help with COVID-19 pandemic expenses. Unlike the state fiscal relief aid contained in the federal Recovery Act that passed in the midst of the recession in 2009, the state aid in the CARES Act cannot be used to address revenue shortfalls. It must be used for expenses directly related to the impact of COVID-19.
While Justice said President Donald Trump would allow states to use this money to fill budget holes, that never came to pass. It is unclear how much local governments or state agencies are using the $1.25 billion in Coronavirus Relief Funds allotted from the CARES Act, since the disbursement of these funds has not been disclosed publicly.
The provisions of the CARES Act propping up our state’s economy are all temporary and expiring quickly. Without continuing federal stimulus, the state’s budget woes likely will get worse during the second half of 2020.
With only one month left in the current budget year, the governor has stated that West Virginia will be able to close this year’s budget gap without calling a special legislative session to allocate money from the state’s Rainy Day Fund. Presumably, the state will use Medicaid surplus funds and other cash on hand to balance the budget.
Of concern is the complete lack of transparency about how, exactly, this year’s budget gap will be addressed, how the $1.25 billion in aid is being disbursed and whether the state plans to revise next year’s budget estimates and expenditures for the fiscal year that begins July 1.
To address the need for transparency and consensus, Justice should immediately assemble a bipartisan advisory committee made up of state and local policymakers and other stakeholders to help guide how best to deploy federal relief money into our communities as soon as possible and how best to close this year’s budget gap and revise next year’s budget without further depressing our state’s economy.
Specifically, the advisory committee should ensure that federal funds are used to the maximum extent possible to cover costs directly related to the pandemic. Payroll of all public safety and public health workers and other workers directly affected by the pandemic should be covered.
Those struggling to pay rent, utilities and other bills, such as funerals, should get direct assistance. Policymakers should avoid making cuts to state and local government services by tapping the Rainy Day Fund, decoupling from federal tax provisions contained in the CARES Act and by raising taxes on those with the best ability to pay. Economists, such as Nobel Prize-winner Joe Stiglitz, have found that raising revenue, especially during an economic recession, is much better for the economy than cutting services and laying off public-sector workers.
In June, the Congressional Budget Office projected the fallout from the coronavirus pandemic will shrink the U.S. economy by $8 trillion over the next decade, resulting in falling energy prices, high unemployment, lower wages and consumer spending and business closures. National unemployment is expected to stay above 9% throughout 2021, nearly as high as the peak of unemployment during the 2008-09 recession.
While federal aid has temporarily kept our state’s economy and state budget afloat, it is imperative that state policymakers and other stakeholders come together to push for more federal aid, explore raising revenue on those who can afford it the most and roll back recently enacted industry tax cuts to ensure we don’t pull back from investments in health care, public safety and education.
Reductions in public services and layoffs will fall the hardest on people living in the coalfields, West Virginians of color, people with disabilities and the youngest and oldest. We all need to come together to make sure that doesn’t happen.
