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Reporter’s Notebook: Breaking Down State Budget Into Simple Math

It’s the job of a reporter to explain why things are happening, but sometimes in our effort to simplify something we lose a bit in the explaining.

Take the state budget, for example. West Virginia released the November General Revenue Fund tax collections, which once again came in above projections.

As I reported last week, the state brought in $342.5 million for November, which was 6.22 percent above projections for the month set by the Department of Revenue. That gave the state a $20.1 million surplus for the month.

For the first five months of fiscal year 2021, West Virginia collected $1.937 billion in tax revenue, giving the state a $131.7 million surplus — 7.29 percent above estimates. There hasn’t been a month during the fiscal year that hasn’t had a budget surplus.

This has all occurred during the bulk of the COVID-19 pandemic, which is part of the reason why some find the revenue numbers hard to believe. They attribute much of the surplus to federal COVID-19 stimulus padding the numbers. They predict that once those dollars dry up, we could start seeing revenue numbers below projections.

Much attention has been paid to the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the $1.25 billion sent to the state for state, county, and municipal COVID-19 expenses. That number doesn’t include the more than $1.14 billion in miscellaneous federal grants given to the state related to the pandemic since July. No doubt these dollars probably have some effect on the economy, but they don’t tell the full story.

Some groups, such as the West Virginia Center for Budget and Policy, have pointed to the $600-per-week pandemic unemployment assistance when businesses started to shut down in March as an example of federal funding propping up the state budget. That amount dropped to $400-per-week once the initial federal funding wasn’t re-approved. The Pew Charitable Trusts released a study in November showing that personal income in West Virginia increased by 14.4 percent thanks to the $1,200 in checks sent to taxpayers during the nearly two-month shutdown.

Of course, all of this leaves out the fact that this funding all came mostly during the previous fiscal year. The unemployment insurance funding continued, but the fact is that unemployment kept reducing every month since April’s high of 15.9 percent. As of October, the unemployment rate was 6.4 percent, which was close to where it was when the pandemic started.

Many of the workers left in a lurch during the stay-at-home order are back to work. Most businesses are back to some semblance of normal, except for the hospitality industry that is operating under reduced capacity in some cases. Some have said the Paycheck Protection Program loans to businesses helped provide a cushion to the state budget. Again, most of the PPP went out before July, and the federal government stopped accepting PPP applications from businesses in August.

There is no doubt that coronavirus relief funds helped buoy the state budget as the 2020 fiscal year ended in June. If it wasn’t for the CARES Act and the fact that the state weathered the Spring shutdown better than expected, the state would have ended the fiscal year in the red. But there’s not much evidence that the CARES Act is a large driver of tax revenue in the current fiscal year.

The fact of the matter is Gov. Jim Justice and the Legislature developed a very modest budget last year for the current fiscal year. It was less than the fiscal year 2020 budget, which was a year that saw a seesaw of tax revenue that sometimes came in above projections and sometimes came in below projections. The fiscal year 2021 budget developed by the executive and legislative branch was probably an example of legislative Republicans and Democrat-turned Republican Justice finally trusting each other.

The budget we’re currently in is the first budget in my memory that hasn’t relied heavily on severance tax revenue. For the most part, coal and severance taxes have not come in at projections per month, though the year-to-date numbers have stayed above water. The beginning of the fiscal year was helped by moving the income tax deadline to July from April. But otherwise, the personal income tax, the corporate net income tax, and the consumer sales and use tax have kept the state in the black. What has also helped is the state spending less. According to a 2020 report released by the National Association of State Budget Officers, expenditures by the State of West Virginia increased by 6.5 percent from fiscal years 2018 to 2019. But from fiscal years 2019 to 2020, spending decreased by 1.2 percent — from $17.9 billion to $17.7 million. In fact, West Virginia was only a handful of states that reduced spending, even as a COVID-19 crisis hit.

If you want to point to some proof that all the federal COVID relief funding is padding the state budget numbers, that could be it. The fact is the feds are paying for coronavirus supplies that otherwise the state might have to be expending money for. That makes U.S. Senators Shelley Moore Capito and Joe Manchin — both members of the Senate Appropriations Committee — also part of the team helping to secure federal funding for the state.

The state budget can be a complicated thing to write about for reporters, but it is our job to explain that complexity and show you as many factors as we can for why things are the way they are.


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