Federal stimulus funds may only delay inevitable, tough spending cuts for West Virginia

Stimulus may only delay inevitable cuts for W.Va.

CHARLESTON, W.Va. — West Virginia is again counting on federal stimulus dollars to avoid painful cuts to state spending, but the coming weeks will show whether those funds are only delaying the inevitable.

Gov. Joe Manchin will soon send the Legislature his latest five-year forecast of state government finances. The last one, issued in February, predicted that available revenues would increasingly fail to keep pace with projected growth in spending.

It estimated budget gaps that would begin in 2011 at nearly $244 million and then widen to more than $370 million by 2014. But those were calculated before the full brunt of the national recession hit West Virginia.

The economic downturn has only worsened the state’s fiscal picture. It forced lawmakers to trim $197 million from the current budget before they passed it in May. It also prompted the midyear, 3.4 percent cuts that Manchin ordered last week for all executive branch agencies.

This year’s budget includes $3.7 billion backed by general tax revenues, and the governor’s office and cabinet departments get 95 percent of that. West Virginia’s stimulus share offset $81 million of May’s cuts. Administration officials expect it will provide a similar amount to soften the blow of last week’s order, which reacts to a recently projected $120 million shortfall in general tax revenues.

The stimulus share will also likely help lawmakers with yet another round of belt-tightening. The new budget that Manchin will propose later this month reduces spending by 5 percent for all administration agencies except public education, which will see a 4 percent trim.

But House Finance Chairman Harry Keith White, D-Mingo, noted last week that the stimulus requires states to spend the bulk of their shares by 2011. If Manchin’s new five-year forecast continues to predict widening shortfalls in the general revenue portion of the budget, the governor and legislators must soon find another strategy for keeping things balanced.

Better positioned than most other states, West Virginia’s alternative options include $168 million in revenues left unspent from prior budget years. There’s also the state’s emergency reserves, which topped $541 million in November.

There are some silver linings as well. State budget officials estimate that general revenue will finally resume growth during the 2012 fiscal year. Manchin also announced late last week that December’s general revenues exceeded their estimates by around $32 million. That more than eclipses the $13.7 million year-to-date shortfall under which the month had begun, allowing the state to start January $19 million in the black.

But West Virginia’s overall financial picture has White’s Senate counterpart seeing serious, permanent cuts to state spending on the horizon.

“The stimulus will keep it off for a little while, but the process will start,” said Senate Finance Chairman Walt Helmick. “I can’t speak for the entire Legislature. I can speak for the Senate. I can tell you, that appetite is there.”

The question remains where. Public Education consumes 48 percent of this year’s general revenue budget. The Department of Health and Human Resources, which oversees Medicaid and an array of other safety net programs, takes another 22 percent. With those spending areas considered among the state’s top priorities, the list of potential, meaningful targets shrinks.

Neither White nor Helmick suggested any candidates for that list. But Helmick said that does not mean that this tough process should not start with the 60-day regular session that begins Jan. 13.

“We have to be prepared for cuts,” the Pocahontas County Democrat said. “They’re very much aware of it, every member of the (Senate) Finance Committee. They’re willing to do the difficult things that need to be done.”