State seeks deeper budget cuts
CHARLESTON, W.Va. -- For the second time in as many years, state agencies are preparing their budgets with a 7.5 percent reduction.
A letter dated Monday from Department of Revenue Secretary Bob Kiss tells all agencies to prepare two budgets - a base budget and one with a 7.5 percent cut. The letter doesn't guarantee any cuts, but state budget director Mike McKown said it might as well.
"As far as I'm concerned, agencies should expect a 7.5 percent cut," McKown said late Wednesday in a phone interview.
Gov. Earl Ray Tomblin called for the same level of cuts last year for the current budget, freeing up about $75 million. McKown said the same cut this year would provide about another $75 million.
It won't be enough, McKown said. The state faces a budget gap of more than $300 million for the 2015 budget year.
The state faced a similar budget gap last year.
As was the case last year, money required for Medicaid is driving the anticipated gap. Last year, McKown estimated the state would need about $180 million more for the 2014 budget year.
Medicaid now needs almost $100 million more than what it's slated to receive during the current budget year, according to Kiss' letter. The costs are not related to Medicaid expansion under the federal Affordable care Act, Kiss wrote.
The state had to take $17.7 million from Medicaid reserve funding in late June to help offset a roughly $93 million shortfall in the overall budget. McKown said the state has "eaten through the trust fund" for Medicaid, and will need to look elsewhere to sufficiently fund the program.
There are other factors to blame, Kiss writes.
"Simply stated, anticipated revenues are not expected to keep pace with the costs of current programs, due to the recent sluggish national economy and a slowdown in the mining of coal," Kiss states.
"Moreover, as we have long anticipated, the trend of declining lottery revenues will continue in FY 2015 due to competition in bordering states."
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Last week, state budget officials said the state is heading into August, the second month of the 2014 budget year, with a $17.9 million budget shortfall. Deputy Revenue Secretary Mark Muchow told the Daily Mail that lower personal income tax collections were to blame for the deficit.
Collections of severance taxes from coal and natural gas companies in July were $6.8 million higher than anticipated and 33 percent more than collections in July of last year, he said.
Several institutions of higher education, along with the state Higher Education Policy Commission, complained last year further budget cuts could lead to higher tuition.
In his letter, Kiss listed several agencies and funds that would be exempt. They include the school aid funding formula, funding for correctional units, the veteran's nursing home fund and debt service. Similar funds were also exempt last year.
Agencies don't need to institute the 7.5 percent budget reduction as an across-the-board cut, Kiss wrote. He asks agencies to explain the full impact of the budget reduction as well as if they decide to move funds within their budget.
Requests for more funding probably won't be considered.
"Again, we must be committed to fiscal discipline over the long term," Kiss wrote.
"Therefore, agencies must be diligent in controlling spending and maintaining programs that are sustainable and not rely on additional state funding for FY 2015."
Tomblin spokeswoman Amy Shuler Goodwin emphasized in a statement late Wednesday the instructions call for two budgets.
"There is no policy that the 7.5 (percent) reduction would be used," Goodwin states. "This is an exercise in case reductions are necessary."
McKown said he wanted the budget with no reduction so the state could enter the numbers into its new accounting system. Called WVOASIS - short for Our Advanced Solution With Integrated Systems - McKown said he wants the first entry to be the 2014 budget numbers.
It will be easier to enter than budgets prepared with the 7.5 percent reduction, because that number could change.
McKown said he didn't know what Tomblin would eventually recommend. The budget challenge facing the state is serious, he said.
"Budget cuts certainly have to be part of the solution," he said.
Agencies must finish both appropriations requests and return them to the state by Sept. 3. After receiving the requests, budget officials schedule hearings with each agency to hash out details.
Tomblin will present the budget to the Legislature at the start of the 2014 legislative session.