Confr fronting West V Virginias L Looming B Budget C Crisis - PowerPoint PPT Presentation

Confr fronting West V Virginia’s L Looming B Budget C Crisis Revenue Options to Sustain Investments in the Mountain State Covenan ant Ho House April 11, 2016 – 600 Shrewsbury Street – Charleston, WV 25301 presented by Ted Boettner, Executive Director West Virginia Center on Budget and Policy www.wvpolicy.org @WVCBP tboettner@wvpolicy.org @WVPolicywonk

Budget R Rules es t to Remem ember er • The fiscal year begins July 1 st and ends June 30 th . • The budget must be balanced (true in 49 states). • The budget does not contain the money we spend each through the tax code (tax expenditures). • Go Gover ernor e exer ercises s s signi gnificant budg budget po power er. This includes line-item veto power (takes 3/5 to override veto) and producing the revenue estimate and most fiscal notes. Unlike 36 other states, West Virginia does not have a legislative fiscal office. • Two-thirds of General Revenue Fund is constitutionally or statutorily protected. • The budget is always in flux.

Importance o of State Budg dget 620, 620,000 000 – approxim imate n number of of Wes est Vi Virginians w who r o rec eceive hea ealt lth care coverage ( (Med edic icaid id/CHIP) w who a o are c e chil ildren, s sen eniors, d disable led, a and l low-income a e adults. 277, 277,000 000 – approximate n number o of children e enrolled i in K-12 public s school system i in Wes est Vi Virgin inia ia. 36, 36,000 000 – approxim imate m miles of of roa oad o over erseen b by the e Wes est Vi Virgin inia ia D Dep epartment of H Highways. 88, 88,000 000 – approximate n number of students e enrolled i in public h higher e education institut utions i in West V Virgini nia. Source: West Virginia State Budget Office, FY 2017 Executive Budget

State F Funds Acc ccount f for Nearly T Two-Thirds o of f Wes est Vi Virgini nia’s S State e Budg Budget Governor’s FY 2017 Appropriated Budget = $12.5 Billion Lottery & Excess Federal Funds Lottery Funds $4.7 B Billio llion $420 20 M Million 38% 3% General Revenue Funds $4.3 B 3 Billion 34% Special Revenue Funds $1.8 B 8 Billion State Road Funds 14% $1.3 B 3 Billion 11% Source: West Virginia State Budget Office, FY 2017 Executive Budget

More T Than T Two-Thirds of Base Budget S Spending S Supports Education and Health a and Human S Servi vice ces Governor’s FY 2017 Base Budget Appropriations = $4.7 Billion Public lic E Educatio ion: $1. $1.9 9 Billio lion 41% Healt He lth & & Human R Resources: $1. $1.3 3 Billio ion 27% Hi High gher E Educatio ion: $451. $451.5 Mi 5 Millio lion 10% Admin inis istratio ion & & Other: $382. $382.6 Mi 6 Millio lion 9% Public lic S Safety: $356. $356.6 6 Mi Millio lion 8% Judic ical & l & Legis gisla lativ ive: $167. $167.8 Mi 8 Millio ion 4% Senio ior S Servic ices: $63. $63.3 Mi 3 Millio lion 2% Commerce: $71. $71.2 Mi Millio lion 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Source: West Virginia State Budget Office, FY 2017 Executive Budget

More T Than T Two-Thi Thirds o of Bas Base Budg e Budget Revenue enue Co Comes es F From Income a and Sales T Tax Collect ctions Governor’s FY 2017 Base Budget Revenue Appropriations = $4.7 Billion Personal I l Income T Tax: $1. $1.9 9 Billio lion 41% Sale les & & Use T Tax: $1. $1.4 4 Billio ion 29% Lottery Revenue: $420 $420 Mi Millio lion 9% Severance T Tax: $280 $280 Mi Millio lion 6% Tobacco & & Alcohol l Taxes: $202 $202 Mi Millio lion 4% Corporate Net Income T Tax: $166 $166 Mi Millio lion 4% Insurance T Tax: $119 $119 Mi Millio lion 3% B&O T Tax: $115 $115 Mi Millio lion 2% Other R Revenue: $66 $66 Mi Millio lion 1% 0% 10% 20% 30% 40% 50% Source: West Virginia State Budget Office, FY 2017 Executive Budget

West V Virginia h has had Persistent B Budget Gaps Since ce 2 2014 FY 2016 FY 2017 FY 2017 FY 2014 FY 2015 FY 2016 (additional) (Jan 2016 ) (Mar 2016) FY 2018 -$20 -$75 -$195 -$216 -$381* -$466 Expressed in Millions -$558 Source: West Virginia State Budget Office. *Note: On current pace, shortfall is projected to be $122 million less. Nine month collections down $146 million (July to March 2016)

General R Revenue F Fund Ex Expected t to be Below 2 2012 $31 $311 million bel below 2005 2005, a , adj djusting f for inflation General Revenue Fund collections, FY2004-FY2017 (in thousands) Nominal Real (2016 dollars) $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: WVCBP analysis of WV State Budget Office data. Note: FY16 assumes current revenue pace of 95% of FY16 original revenue estimate.

Base B Budget S Spending Down A Acr cross t the Board Medicaid a and S Supreme C Court o only growing d departments FY 2012 Actual and FY 2017 Governor’s Proposed Ba Base Bu Budget Expenditures (thousands) Department FY 2012 FY 2017 Difference Percent Change Legis gisla lature $31,082 $24,022 -$7,060 -23% Judic icia ial $126,817 $143,760 $16,943 13% Exe xecutive $60,051 $36,570 -$23,481 -39% Admin inis istratio ion $165,480 $114,779 -$50,701 -31% Comme mmerce $90,071 $71,173 -$18,898 -21% Educat ation $2,074,822 $1,928,645 -$146,177 -7% Education a and t the Arts $52,825 $49,510 -$3,315 -6% Environment $12,309 $6,633 -$5,676 -46% Health a and H nd Hum uman R Resour urces $847,518 $1,261,494 $413,976 49% Mi Milit itary A Affairs & & Public lic S Safety $366,541 $356,579 -$9,962 -3% Rev even enue $205,964 $168,490 -$37,474 -18% Transportatio ion ( (Doesn’t i inclu lude R Road F Fund) $7,589 $5,885 -$1,704 -22% Veterans A s Assistance ce $10,604 $10,499 -$105 -1% Seni nior S Services $64,224 $63,280 -$944 -1% Hi High gher E Educatio ion $514,890 $451,495 -$63,395 -12% Mi Misc. B Boards & & Commis issio ions $64,989 $55,000 -$9,989 -15% Total Ba Base Budg Budget $4,630,776 $4,682,814 $52,038 1.10% Source: WVCBP analysis of WV State Budget Office data.

2017 Base 20 se Budget $60 $600 m million L Less t ss than projected i in 201 2012 Actual and Projected Base Budget Expenditures, FY 2013-2017 (thousands) Projected Actual $5,285 $5,196 $5,031 $5,033 $4,852 $4,694 $4,683 $4,636 $4,584 $4,553 2013 2014 2015 2016 2017 Fiscal Year Source: WV State Budget Office, FY 2013 Executive Budget, Budget Report 1

As Revenue F enue Fal alls R Rel elative t to the he State’ e’s E Econo nomy, W Wes est Vi Virginia Loses A Ability t to Invest i in Human and Ph Physical C Capital General Revenue Funds as a Share of State Personal Income (per $1,000 of Personal Income) $80 $75 AVG = = $68 $68 $70 $65 $60 $62 $62 $55 1990 1995 2000 2005 2010 2015 FISCAL YEAR Source: WVCBP analysis of U.S. Bureau of Economic Analysis and WV State Budget Office data

The D Declin cline of of the C Corp orporate N Net t Income a and B Busin iness F Franch chis ise Tax Down by $250 million since 2008, shrinking from 10% in 2008 of GRF to 3% 2017 (in millions) 14.0% $450 12.7% $388 $400 12.0% Business taxes as a share of General Revenue Fund $348 $358 $350 10.0% $303 $300 $281 $270 $263 $251 8.0% $238 $250 $235 $233 $222 $222 $218 $214 $220 $219 $204 $202 $191 $182 $179 $185 $188 $200 $181 $181 6.0% $178 $137 $150 4.0% $100 2.0% $50 0.0% $0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: West Virginia State Budget Office data.

Another E Econ onomic R ic Rece cessio ion i in West V Virgin ginia ia Nonfarm jobs at 2006 levels, seasonally adjusted (in thousands) 790 780 770 760 750 740 730 720 710 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: U.S. Bureau of Labor Statistics, Current Employment Statistics

Mining Econ Mi conom omy i y in West V t Virginia t taking a g a hit About 13,000 fewer jobs since 2011 peak, production under 100 million tons in 2015 WV C Coal Mi Minin ing P Productio ion and Min ining & & Log ogging J Job obs, 200 2004-201 2016 6 Producin ing C g Coal Mi Mines, 2000 2000-20 2015 15 (seasonally adjusted, in thousands ) 40 Producing Coal Mines Annual Coal Production (tons) 350 35 300 30 250 25 200 150 20 100 15 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: WVCBP analysis of MSHA data and U.S. Bureau of Labor Statistics (Current Employment Statistics)

Ma Major or R Revision ons in Severance ce T Taxes H Highlight t Weak E k Energy y Econ conom omy *Updated March 2016 estimate for FY2017 now $262.5 million, -$17.6 million Expressed in Millions $632 $606 $581 $525 $475 $472 $472 $414 $337 $323 $303 $292 $280 2015 2016 2017 2018 2019 2020 2021 FISCAL YEAR Governor's 2016 Estimates Governor's 2015 Estimates Source: West Virginia State Budget Office.