wvpolicy.org | @WVCBP Back to the Future: Overview of Governor’s Proposed FY 2021 State Budget 7 th Annual WVCBP Budget Breakfast T ed Boettner Executive Director Charleston Marriott T own Center West Virginia Center on Budget & Policy January 15, 2020 – 7:30am-9am
Governor’s FY 2021 Appropriated Budget State Road Fund: $1.36B Special Fund: $1.51B (Gas Taxes, DMV Fees, Federal $) (Fees, Licenses, Permits, Earmarked Taxes) General Fund: Federal Funds: Total = $4.59B $5.78B $13.7 (Schools, (Medicaid/Block Grants Health/Human Services, Billon /Other) Colleges, Corrections, 3 Branches, etc. ) Lottery Funds: $468M (Earmarked for Higher Ed, K-12, Seniors, General Fund, etc.) $0 $2 $4 $6 $8 $10 $12 $14 Governor’s Proposed FY 2021 Budget 2
Governor’s Proposed Base Budget Appropriations Fiscal Year 2021 = $5.053 Billion Other, 6.9% Administration, 2.3% Base Budget = General Revenue + Commerce, 1.9% Lottery Funds Public Education, Health & Human 41.9% Resources, 23.7% Senior Services, 1.4% Military Affairs & Judicial & Legislative , Public Safety, 8.8% 3.2% Higher Education, 9.9% Governor’s Proposed FY 2021 Budget 3
Governor’s Proposed Base Budget Revenues Fiscal Year 2021 = $5.028 Billion Expressed in Millions Lottery, $501.1 Corporate Net Income, $144.5 Personal Income, 10% $2,156.2 Insurance, $131.8 43% B&O, $126.9 Other, $98.8 Sin Taxes, $186.0 28% 5% Severance, $253.8 Sales & Use, $1,422.1 +$173 million in Onetime Reductions (Mostly Medicaid Surplus) Governor’s Proposed FY 2021 Budget 4
Medicaid Surplus Revenue Funds FY 2014-FY 2020 • The Federal Medical Assistance Percentage Expressed in Millions $309 (FMAP) has grown from 71.09 in 2014 to 74.99 in $250 2020 (1:3.00), a savings of $219 $117 million on $3 billion. • 50,000 decline in Medicaid enrollment (552,000 to $126 502,000) • Rx drug savings • Managed Care (MCOs) $43 $33 $20 • One-time funds (surpluses, base building) FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 Source: West Virginia State Budget Office Governor’s Proposed FY 2021 Budget wvpolicy.org | @WVCBP
Governor’s Proposals for Medicaid Surplus Revenue Funds (FY 21) $150.0 Expressed in Millions $108.0 $19.8 $14.9 $7.0 $4.4 Medicaid General I/DD Waiver CHIP Child Protective Social Services Families First Revenue Backfill Services Reserve Fund Source: West Virginia State Budget Office Governor’s Proposed FY 2021 Budget wvpolicy.org | @WVCBP
State Rail Authority $2.8 State Trooper Retirement $8.3 Mountaineer Challenge Governor’s $3.3 Academy Base Budget Supreme Court $11.2 Institutional Facilities $11.7 Proposals Operations/Capital Outlay Professional Student $21 Support Services Other FY 2021 Major Base Budget Increases TRS $11 Tourism $7 $0 $5 $10 $15 $20 $25 Expressed in Millions Governor’s Proposed FY 2021 Budget 7
Dramatic growth in foster care Social Services has grown by $135 million since FY 2010 Base Budget Spending, FY 2010-FY 2021, Expressed in Millions $209.6 $196.1 $182.8 $135.3 $134.2 $142.5 $150.9 $108.7 $116.4 $90.8 $78.1 $74.2 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 Governor’s Proposed FY 2021 Budget 8
Large projected budget deficits next year and beyond Projected Budget Gaps, FY 2022-FY 2025 Expressed in Millions FY 22 FY 23 FY 24 FY 25 -$157.9 -$164.3 -$170.1 -$171.4 Source: West Virginia University Business Bureau of Business and Economic Research, Economic Forecasts 2014-2019 Governor’s Proposed FY 2021 Budget wvpolicy.org | @WVCBP
Major Takeaways from Governor’s FY 2021 Budget ✓ Revenue projections from last year (FY 2020) projected $221 million more in general revenue fund collections for FY 2021. Severance forecast down $174.5 million from last year. In 2016 (FY17) estimated GRF collections were $460 million above this year’s estimate for FY 2021. ✓ Six-Year Financial Plan shows no additional money for Higher Education from FY21-FY24, but substantial growth in Medicaid in FY 2024 (+$106.7 million) and moderate growth in corrections, DHHR, and PEIA. No salary enhancements for two years (+$23m in FY 2023). ✓ State continues to significantly underfund higher education and needs to adequately fund agencies across the board to meet growing needs and pay gaps. ✓ Energy economy (property taxes), lottery and Medicaid surpluses, and declining school enrollment allowing state to fill budget holes. Between FY 2012 and FY2019, lottery funds had an average annual surplus of $68 million or 14%. ✓ West Virginia continues to have a structural budget deficit (spending > revenue) from major tax cuts enacted between 2006 and 2015. State needs to raise additional revenues to meet current needs and to invest in our people and communities to build a stronger economy. Governor’s Proposed FY 2021 Budget 10
West Virginia’s Lost Decade Major Factors Impacting West Virginia’s Budget Changes Over the Last Decade • Great Recession: Private sector payroll employment down 3,900 from December 2007 to November 2019, but up 22,400 from November 2017 (seasonally adjusted). • Population decline : WV population declined by 63,076 from 2012 to 2019 (July 1). Nonfarm payroll employment, annual average, in thousands 734 732 731 729 726 726 726 725 717 717 716 715 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Governor’s Proposed FY 2021 Budget 11
West Virginia’s Economic Outlook is Weakening WVU BBER Forecasted Average Annual Employment Growth 1.0% 0.9% 0.7% 0.6% 0.5% 0.4% 0.2% 2013-2018 2014-2019 2015-2020 2016-2021 2017-2022 2018-2023 2019-2024 Source: West Virginia University Business Bureau of Business and Economic Research, Economic Forecasts 2014-2019 Governor’s Proposed FY 2021 Budget wvpolicy.org | @WVCBP
School enrollment declined by 20,274 from 2008-09 to 2019-20 Only five counties experienced enrollment growth and 84% was in Berkeley and Monongalia County Monongalia Pocahontas Hampshire Greenbrier Doddridge Pendleton McDowell Randolph Wyoming Pleasants Summers Kanawha Jefferson Harrison Marshall Webster Berkeley Nicholas Hancock Monroe Barbour Calhoun Mineral Morgan Braxton Preston Putnam Fayette Jackson Raleigh Mercer Marion Upshur Wayne Brooke Wetzel Lincoln Mason Ritchie Tucker Gilmer Boone Mingo Wood Roane Cabell Taylor Logan Hardy Grant Lewis Tyler Ohio Wirt Clay 1,800 800 -24,714 - 50 counties -200 -1,200 +4,440 5 counties -2,200 Student enrollment declined by 20,274 from 2008 to 2021 while local property taxes (local share) have increased (23.7% to 27.9%). If enrollment was at 2008 levels and local share was 23.7%, State Aid to Schools would be an additional $154.6 million in GRF budget. -3,200 Source : West Virginia Department of Education 13
In-State Public College Enrollment Down over 12,000 WV Public Four-Year (HEPC) and Two-Year (CTCS) Fall Headcount, 2008-2018 71,068 71,556 70,894 67,531 66,070 65,304 62,419 61,324 60,303 59,339 58,567 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fall Headcount by Year Governor’s Proposed FY 2021 Budget 14
Higher Education Funding Down $32 million reduction from FY13 to FY19, down $124 million from FY 08 (today’s dollars) Base Budget Spending, FY 2008-FY 2021, Expressed in Millions $620 (2019 dollars) $515 $528 $507 $487 $459 $468 $497 $488 $496 $496 $458 $452 $437 $454 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 Governor’s Proposed FY 2021 Budget 15
General Revenue Growth Slowed Dramatically After Major Tax Cuts Annual Average Growth of General Revenue Fund Collections, FY 1990-2019 Before Major Tax Cuts: 1990-2005 = 5.6% - During Major Tax Cuts 2006-2016 = 1.5% - 2017-2024 = 2.7% 20% Major Tax Increases ✓ Major Tax Cuts Pipeline Boom Coal Boom Enacted 15% ✓ Energy Boom/Bust ✓ National Recession 10% 5% 0% -5% FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Source : WV State Budget Office Governor’s Proposed FY 2021 Budget 16
Taxes are low and investments down At 6.8%, FY 2019 GRF collections would be additional $368 million General Revenue fund collections as a share of state personal income 7.5% 7.4% 7.3% 7.1% Average 6.8% (90-06) 6.9% 6.7% 6.5% 6.3% 6.3% 6.1% Phased in tax reductions (CNIT, 5.9% BFT, Food, and Other): 5.7% $425 million + 5.5% Source: WVCBP analysis of data from U.S. Bureau of Economic Analysis (revised quarterly income data) and WV State Budget Office (September 2019) Governor’s Proposed FY 2021 Budget 17
The Great Tax Shift from Corporations to Families in West Virginia, 2005 to 2019 $331 million Tobacco (+$80) Online Sales (+$30) Motor Vehicle (+$147) Local Sales (+$74) BFT Repeal (-$150) Grocery Tax Repeal (-$162) Cut CNIT (-$69) Family Tax Credit (-$18) Manufacturing (-$35) Homestead Tax Cuts (-$8) Repeal Charter (-$7) -$188 million Repeal Inheritance (-$20) Timber Severance (-$4) Workers’ Comp ( -$109) Steam Coal Sev. (-$64) Super Coal Credit (-$20) -$478 million Progressive Tax Cuts Regressive Tax Cuts Regressive Tax Increases Taking Inventory 18
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