Learn Whether Cuts Are Needed
With the process of “reopening” our economy seemingly well along in West Virginia, nagging questions remain to be answered for state policymakers. High on the list is how many businesses succumbed to the COVID-19 shutdown and how they will affect the economy as a whole and, more particularly, the state budget.
No doubt many Mountain State residents are aware of businesses that did not reopen after Gov. Jim Justice’s shutdown order was lifted. Many know people who were laid off or furloughed by businesses, but have not yet been recalled. Some never will go back to their old jobs.
Like the rest of the nation, our economy was altered by the coronavirus epidemic. Some things will never return to what just a few months ago we thought of as normal.
Learning just what the “new normal” means to West Virginia’s economy will be keeping both state analysts and policymakers up at night for the foreseeable future.
Budgets are set by the executive and legislative branches based on analysts’ estimates of how much money can be raised during the fiscal year. Fiscal 2021 begins on Wednesday.
Financial woes that had nothing to do with COVID-19 prompted Gov. Jim Justice and lawmakers to dial back on spending for fiscal 2021. The general revenue fund spending plan includes $4.574 billion, nearly $100 million less than had been allocated for the current year.
How much activity there will be in the economy will be the key to whether that $4.574 billion can be raised. The two largest individual revenue items, sales taxes and personal income taxes, were forecast to bring in about $3.5 billion of the total.
A significant amount of revenue is tied directly to business activity. Business and occupation taxes are budgeted at $123 million, with corporate income taxes at $136.9 million, for example. And, in a separate budget, the “Other Funds” spending plan, a substantial amount of revenue comes from sources linked to businesses.
Some of that income simply will go away during the coming fiscal year, with some businesses never reopening and others forced to cut back.
Much of the planning will amount to guesswork, by necessity. But on a month by month basis, the governor and Legislature should review revenue reports and forecasts.
If indications are that spending cuts are needed, they should be implemented as soon as possible. Putting off the inevitable would not be prudent.