West Virginia Press Association Staff Report
CHARLESTON, W.Va. – The Senate Finance Committee, on Thursday, began their deliberation of Gov. Jim Justice’s Fiscal Year (FY) 2025 budget proposal. On-hand to provide an overview and answer committee member’s questions regarding the proposal was the state’s Acting Revenue Secretary Larry Pack.
“The FY 2024 general revenue budget appropriated was $4.871 billion,” Pack began. “This year’s budget, FY 2025, the governor recommends $5.222 billion. That’s about $340 million of an increase above last year.”
According to Pack, the “major bullet points” responsible for the increase are $123 million for state employee pay raises, a $100 million Congressional expenditure for earmarks and floods, $50 million for contract nursing services at state facilities, and $21 million for additional Medicaid costs. Pack also cited increased costs associated with tourism, the Legislature’s 2023 passage of the Public Employees Insurance Agency (PEIA) bill, and additional investments for correctional workers as factors behind the budget increase.
“We also have some supplementals,” Pack said. “These are monies that were left over after the last fiscal year that’s never been expended. There’s about $400 million I think in this bucket. The governor did not propose we spend all of it, but he has some major things in this area.”
Pack told committee members that the budget proposal includes a $150 million supplemental appropriation for the School Building Authority (SBA), noting that, “The governor is a big proponent of public schools.”
“He’s also proposing $5 million for charter school seed funding,” Pack added. “The governor expects it would be able to help some of the physical charter schools do some of the deferred maintenance they need to do […], but also to be used for some of the start-up costs.”
Additional funding for nursing training and services, the Posey Perry Mercy food fund, Medicaid, and senior center deferred maintenance are among Justice’s budget recommendations. If approved, Pack explained, this funding would be immediately available for use.
At the conclusion of Pack’s presentation, Sen Ben Queen, R-Harrison, requested clarification regarding the $150 million appropriation for the School Building Authority, asking, “How did we get to that number?”
“There were $150 million worth of projects that SBA felt like were worthy, and they did not have the funding to address those,” Pack replied. “If the legislature passes this, it will allow the SBA to immediately address those.”
Also included within the governor’s FY 2025 budget proposal are $49.7 million in tax cuts. Justice’s three tax-cut recommendations are the exclusion of Social Security benefits from state income tax, the creation of a child and dependent-care tax credit, and the expansion of the senior citizen homestead tax credit.
“These tax cuts were taken into consideration in the revenue estimate,” Pack explained, adding that the child and dependent-care tax credit has been modeled after the federal program. “These are annual tax reductions, so they’ll be in place until a future legislature decides to change it.”
After Pack’s explanation of the proposed tax cuts, Sen. Eric Nelson, R-Kanawha, requested that the acting secretary provide additional information regarding the “$100 million Congressional expenditure for earmarks and floods.”
“The idea there is we’re seeing floods around the state that are not covered by FEMA (Federal Emergency Management Agency),” Pack said. “The governor is suggesting setting up a fund that would help people – replace their bridges, get their homes back in order – when there is a flood that doesn’t rise to the level of FEMA benefits.”
Shifting attention back toward the governor’s suggested supplemental appropriations, Committee Chair Eric Tarr, R-Putnam, expressed concerns regarding the supposed “one-time” allocations. Tarr verbalized his thought that these allocations would potentially become “base-building items,” meaning that once introduced, such appropriations would become part of the annual budget moving forward. Pack stated his need to defer to Deputy Revenue Secretary Mark Muchow.
However, committee members did not have to wait long for Muchow’s response, as he was present for the committee’s second meeting later Thursday afternoon. Muchow began by delivering a revenue summary.
“The economy continues to show growth with lower inflation,” Muchow said. “Our energy sector continues to show production increases, however prices are down from the prior year. Last year we had record prices, particularly for natural gas. This year prices are down, and they’re also a little bit lower for coal.”
According to Muchow, between fiscal years 2010 and 2019, West Virginia averaged only 2% general revenue fund growth per year. Beginning in 2020, however, average general revenue revenue fund growth has climbed to 8.1% per year.
“Projected between 2023 and 2029 is negative 1.5%,” Muchow said, explaining that the negative revenue growth is the result of the state’s multi-year tax cut initiative. “The official estimate in 2024 was $4.884 billion, which matched the governor’s proposed budget for that year. The official estimate for 2025 is `$5.2645 billion.”
Tarr then returned to his previous concern, asking Muchow, “Do you see years where you spend way beyond what the revenue climb looks like as a percentage of your previous spend?”
“For instance, if we grow 3%, are we passing budgets that are 10 or 12% growth?” Tarr asked.
“In response, Muchow said, “We’ve had a lot of extra money in the last couple years.”
“The legislature, I think, is concentrating that extra money to the extent that you’re appropriating it on one-time activities that don’t necessarily have to be funded year-in and year-out,” Muchow added. “So as long as you’re doing one-time activities – and a lot of that money is going to the state’s rainy day fund. It appears that the legislature has been pretty careful about not overspending on items that will move forward.”
