The state was able to balance the budget for the current fiscal year without taping into the Revenue Shortfall Reserve Fund, commonly known as the rainy day fund. Administration officials said using money from the fund was an option last year. Muchow and McKown agreed the state might need to dip into the more-than $900 million account.
Using money from the rainy day fund is a first step in addressing long-term financial woes, said Ted Boettner, executive director of the West Virginia Budget and Policy Commission.
Many agencies were exempt from the 7.5 percent cut last year: the school aid fund, corrections, child protective services and more. Higher education was not: Boettner said the state should consider taking money from the rainy day fund before cutting millions from money meant for colleges.
Blaming Medicaid or a sluggish economy doesn't account for the full financial picture either, Boettner argued. He pointed to cuts in corporate and business tax rates, the elimination of the food tax and tax incentives as other reasons the state doesn't have as much money as it did in the past.
"It's an empirical fact that when you cut taxes and remove a significant amount of revenue, you're going to see budget cuts unless you increase taxes," Boettner said.
Boettner pointed out the state collected less business taxes during the last budget year than it did in the 1999 fiscal year. Companies mining coal from "thin-seamed" mines-seams of less than 45 inches in average thickness-received $75 million in tax relief in 2011, compared to about $23.5 million in 2006.
"Nobody wants to say, 'Hey, wait a minute, wait a minute, some of our budget problems are self-inflicted,' " Boettner said.
Boettner said he doesn't necessarily think the state should increase corporate or business taxes. But he thinks examining tax credits and subsidies to see if they are functioning as intended could potentially help the state find new revenue.
He does thinks the state should increase its tax on tobacco. West Virginia taxes 55 cents per pack, putting it at 44th in the nation, according to the Federation of Tax Administrators.
There's a reduced tax rate for mining thin-seamed coal, but Muchow said even with the reduced rate the state collects about three times more from coal severance tax now than 10 years ago.
More broadly, Muchow said the back-to-back budget cuts don't reflect the trend. The state anticipated the 2014 and 2015 budget years would be lean, and Muchow said they'd balance the books with the resources they have.
The state is required to pass a balanced budget. Kiss called on agencies to submit both budget plans by September 3. The state will meet with each agency in the fall, hashing out budget details.
Tomblin will present the budget to the Legislature in January 2014. Legislators have the final say on passing a budget.