What’s Happening as the Session Winds Down?

Budget Beat for March 29, 2013

At the Capitol

Two issues which the WVCBP has researched and provided analyses on in recent months are receiving some legislative attention as the session winds down. Worksharing (HB 2952) passed the House Judiciary Committee on Tuesday during one of the committee’s marathon late-session meetings. It awaits action in the House Finance Committee.

Senator Jeff Kessler’s Future Fund bill (SB 167) has been read for a second time and is now before the Senate Finance Committee. Bills need to come out of committee by this Sunday, March 31 in order to have time to be read three times on the Senate/House floor.

Evidence Counts – the WVCBP blog

Evidence Counts covered a wide range of issues this week. In response to the Senate passage of SB 187 that would require a jobs impact statement on legislation that impact the state’s economy, Ted’s blog post takes a look at the reality of such a change. With the reliability of fiscal notes already frequently called into question, it’s hard to fathom how an even more sophisticated analysis could be done. A more plausible solution would be creation of a state fiscal office similar to those in 40 other states.

Ted also blogged about an IHS Global Insight study which is projecting the economic impact of Marcellus Shale development to be just a fraction in West Virginia of what it will be in Pennsylvania and Ohio.

On Monday Ted spoke to the Kanawha County Democratic Women’s Caucus on chained Consumer Price Index (CPI) and he has blogged about how using the CPI to decide on how much or if to raise Social Security each year would harm the state’s senior citizens.

WVCBP in the News

Two stories by Public News Service covered budget issues – one looked at how funding to West Virginia’s colleges and universities is being cut as enrollment increases. The other looked at how the recently passed Ryan budget would impact West Virginia, drastically cutting federal funding to programs over the next 10 years by billions. Low- and middle-income working families rely on many of the programs that would be impacted should this budget pass.

Job Impact Statements: Can They Work?

On Tuesday the Senate passed SB 187  that would require the Commerce Department to create a jobs impact statement or study on proposed legislation that could impact the state’s economy.  The price tag from the commerce department is $262,000 per year, enough to add two additional staff to its Research Unit to prepare these statements. (The price tag could increase since an amendment was added to allow the governor or three-member panels of either the House and Senate to request a jobs impact study.)

While the debate surrounding the legislation focused on who can request the analysis, it sidesteps the more important question of whether or not somewhat definitive estimates of the jobs impact of bills can actually be done. If legislation like this were to be enacted, the resultant impact analyses would be somewhat official and thus deserving of some deference by legislators. To me, that sounds like a very risky situation, especially when the head of the Commerce Department says  publicly that none of his researchers have the expertise to do such analyses.

As Jared Hunt emphasized in an business column last month, if the state’s track record at producing accurate fiscal notes is any indication of how accurate the jobs impact analysis from the Commerce Department will be then we might be better to just use a Magic 8 ball.

A jobs impact statement has been championed by WV Chamber of Commerce for years. while environmental groups think its a back-door way to kill regulations. One reason why environmental groups may be skeptical about the legislation stems from a Marshall University analysis conducted by CEBR done over a decade ago on the economic impact of changes to surface mine permitting. The CEBR report was politically motivated and it was heavily questioned by a competing economic impact analysis conducted by the EPA. 

While many states conduct economic impact analysis of legislation, very few look specifically at whether legislation creates or destroys jobs. While a jobs impact analysis could be good tool for deciphering the impact of legislation on the state’s economy, it could be greatly improved if it expanded the scope of analysis to include other impacts and that there are assurances that the analysis is objective and evidence driven.  For example, a jobs impact statement should not just show the number of jobs created by tax credits, but also the strain it would put on state and local government services by the forgone revenue.

Beyond expanding the scope of analysis, it would be much better if the analysis was conducted by a respected and objective agency that does not benefit from the implications of the legislation (e.g. the Commerce Department uses tax credits and EDA loans to attract business and it not a source of objective interpretation of these programs). For example,  the state could join the other 40 states that have a independent legislative fiscal office and they could conduct the jobs impact statements.  That way, the public and the legislature could be reassured that the jobs impact analysis is unbiased and objective and it could also improve the fiscal notes that are the cause of so much frustration at the Capitol.

IHS Study Shows Mountain State’s Small Share of Shale Boom

Last Wednesday, Jared Hunt with the Daily Mail reported that a new study by IHS Global Insight projects that West Virginia will see a huge boom in economic growth from unconventional oil and gas activity over the coming decades.

According to an IHS Global Insight study, West Virginia’s oil and natural gas industry accounted for 11,900 direct and indirect jobs in 2012. By 2035, the firm projected employment could grow to more than 58,000.

The amount the industry adds to the state economy is also projected to grow nearly six-fold.

Last year, the oil and natural gas industry boosted the state’s economy by $1.6 billion. By 2035, that impact is expected to grow to nearly $9.4 billion.

As we’ve pointed out before, there is little doubt that the state is seeing a surge in economic activity from the development of the Marcellus Shale. However, what I found interesting about the study was the small share of projected unconventional oil and gas activity in West Virginia compared to Ohio and Pennsylvania. All together these three states are projected to contribute $93.7 billion in total (direct, indirect, and induced) value-added economic activity by 2035. As mentioned above, West Virginia’s share of this activity is $9.4 billion or only about 10 percent.

This disparity can also be seen on the number of jobs projected to be created from shale development. Of the 712,228 projected in employment by 2035 by IHS from unconventional oil and gas activity, West Virginia only accounts for about 8.1 percent. Looking at just direct jobs, by 2035 West Virginia is expected to have only 10 percent (21, 559 of 216,542), of the jobs among the three states by 2035.

Studies like this one should always be taken with a grain of salt. After all, there are no facts about the future and there are way too many moving parts to make a reasonable assessment of how the shale play in our region will play out. It is also important to recognize that studies like this fail to account for the costs that drilling imposes on citizens, the environment, and state and local communities.

Chained CPI: A Bad Deal for West Virginia Seniors

Over the last several months, federal policymakers have been considering changing the inflation measure used to calculate the annual cost-of-living-adjustment (COLA) of Social Security payments from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) with the chained-CPI.  On Friday, the U.S. Senate voiced opposition  to adopting the chained-CPI, although President Obama and a lot of powerful groups are pushing it as a way to shore up Social Security and reduce the federal deficit.  

The problem with this logic is that Social Security does not face any real short-term solvency problems (nor does it contribute to the deficit) and that adopting the chained-CPI would reduce benefits while failing to capture price changes on the goods and services seniors most likely consume. 

While the chained-CPI might be a more realistic measure of price changes for the population as a whole, it is not a more accurate measure of the cost of living for seniors. That’s because seniors tend to devote a larger share of their income to health care, which has grown more rapidly than other services and goods that the general population consumes. If policymakers are interested in indexing Social Security to a more realistic measure of changes in expenses among seniors they could adopt the experimental elderly price index (CPI-E) that the Bureau of Labor Statistics (BLS) has constructed for seniors over the age of 62. According to economist Dean Baker, over a 10-year period, adopting the chained-CPI would reduce benefits by roughly three percent, after 20 years six percent, and after 30 years nine percent.

It is also important to recognize that while Social Security benefits are quite modest  – the average benefit was $13,381 in 2010 in West Virginia – they are a large source of income for the state. In fact, they are a larger share of West Virginia’s personal income (9.5%) than any other state in the country. Therefore, any reductions to the benefit would greatly impact the state’s income base and its large share of seniors.

A lot of West Virginians depend on Social Security for their retirement. In fact, approximately 31 percent of seniors on Social Security in West Virginia rely solely on Social Security for their retirement income and two-thirds of seniors rely on it for at least 50 percent of their income.

Social Security is also the central reason why so many West Virginia seniors are not in poverty. As the chart below shows, over half of all seniors in West Virginia would be considered poor (less than $10,788 annually) without income from Social Security. All together, it lifts 113,000 West Virginia seniors out of poverty.

While the chained-CPI may sound like a small technical change to some folks in Washington, it is not something that is in the best interest of West Virginia seniors or the state’s economy.

Winter, Wonks and What’s Up?

Budget Beat for March 22, 2013

We are getting just a little tired of winter, how about you? As the legislation session winds down and winter appears endless, here’s what been going on this week at the WVCBP.

Ryan Budget Passes, McKinley and Rahall Vote Against It

Joining nine other Republicans, West Virginia Congressman David McKinley voted against House Budget Committee Chairman Ryan’s budget. Congressman Nick Rahall voted with the rest of the Democrats against the bill. According to the Center on Budget and Policy Priorities, Chairman Ryan’s budget would get 66 percent of its budget cuts from programs for people with low and moderate incomes. Here is the roll call on the vote.

Evidence Counts – the WVCBP blog

A recent report by The American Society of Civil Engineers on the condition of the nation’s infrastructure shows that West Virginia needs to invest billions to repair its dams, bridges and roads. 47 percent of the state’s roadways are mediocre or in need of repair while 23 percent of its bridges are considered functionally obsolete. Read more in Stuart’s blog post.

As policymakers decide how to prioritize the state’s budget they need to consider the long-term effects of the millions in cuts to higher education in Governor Tomblin’s proposed FY 2014 budget. Public colleges are already responding by raising tuition and cutting programs. Read more here.

Jobs Count has been a monthly WVCBP tradition. Each month, we took Bureau of Labor Statistics (BLS) data and showed what was happening with West Virginia’s jobs picture. This week we learned that the BLS had revised its data all the way back to 2008 and the results were a completely different story for West Virginia. In fact, instead of losing 13,900 jobs in 2012, with major losses for government and mining, the state gained 1,400 jobs, with increases coming grom education and health servcies and leisure and hospitality. Read more in Sean’s blog post about these surprising changes to the data.

WVCBP in the News

It was a busy news week including two stories on the Voter ID law, one in the Charleston Daily Mail and one in the Spirit of Jefferson. A recent WVCBP report shows that the law could cost the state $5 million over the next five years while attempting to solve a voter fraud problem that does not exist. 

Cuts to higher education were in the news this week as the Charleston Gazette reported on our analysis of the governor’s FY 2014 proposed budget. How the budget cuts will impact students was reported today by the West Virginia Public News Service which also highlighted a report by the Center on Budget and Policy Priorities which shows that West Virginia is not alone in putting education funding on the chopping block.

Some good news for the budget – projections on how much Medicaid is expected to cost over the next decade have fallen as reported here. The projections have dropped by $200 billion largely due to the Affordable Care Act.

This week Ted appeared on the Legislature Today to discuss children in poverty. Watch Ted here. Other topics were discussed as well as the legislative session starts its home stretch. The Future Fund, legislation introduced by Senate President Jeff Kessler, was cited in the Logan Banner as a way to help alleviate poverty in the southern coalfields.

Thomas, West Virginia made the Washington Post’s Travel Section this week as a place to escape to for live music, art culture and interesting history. Ever been?

Higher Education Should Be A Higher Priority

West Virginia is not alone when it comes to cutting funding to Higher Education. According to a new report by the Center on Budget and Policy Priorities, from 2008 – 2013, state spending on public colleges and universities dropped by an average of 28 percent or $2,353 per student. All but two states, North Dakota and Wyoming, have reduced state funding.

To counter the effect of these cutbacks, four-year public colleges have increased tuition an average of 27 percent or $1,850 per student (national average). Unfortunately even this increase has not been enough to make up for the decrease in funding and many institutions have also had to cut back on services such as libraries, instructional time and other programs.

West Virginia has cut higher education funding by 17.8 percent or $1,488 per student per year. In turn, its public colleges and universities have increased tuition by 21.4 percent or $1,037, an unfortunate trend in a state that already has a lack of trained workers. 

Last week we released our annual analysis of the governor’s proposed budget. The governor called for $75 million in cuts, half of which are to come from higher education.  Instead of increasing revenues, the governor is asking students and their families, along with the colleges and universities they attend, to absorb more and more costs. Shepherd University has already announced that it must raise tuition by 7 percent to help offset the reduction in state funding.

As stated in the Charleston Gazette today by Professor Christopher Swindell, shifting more of the cost of education onto students and families is nothing but a disguised tax increase.  He goes on to say that “budgets are moral documents. They reflect our collective priorities, or at least they should.”

If legislators buy into Governor Tomblin’s plan to cut higher education funding they are sending a clear message to students, families, and public colleges and universities that a well-trained workforce is just not a priority for us.

Improving Infrastructure Good For West Virginia

Infrastructure is an important aspect of this country that is often taken for granted. Every family, community, and business relies on infrastructure to thrive. It is what connects people and goods across this nation. It can measure the quality of life enjoyed by millions.

As the Charleston Gazette reported this morning, the American Society for Civil Engineers (ASCE) has released a national report card grading the conditions and performance of the nation’s infrastructure. Overall, the United States has earned a D+ in infrastructure, a slight rise from the 2009 grade of D. The ASCE estimates that $3.6 trillion investment is needed by 2020 to “maintain a state of good repair.”

Infrastructure includes the roads, bridges, dams, levees, railroads, parks, schools, electrical grids, waterways, and waste that affect people daily. In West Virginia, many of these systems are in need of improvement. For example, the Mountain State operates 380 high-hazard dams and has a safety budget of only $624,729, ranking it 20th in the nation. Neighboring states Ohio and Kentucky are ranked 4th and 5th respectively. Pennsylvania is 2nd with a safety budget of $2,502,295.

West Virginia’s roads and bridges are also in need of repair. More than one in three bridges (35.9 percent) is “structurally deficient” or “functionally obsolete.” Reports have ranked West Virginia’s bridges 8th worst in the country in terms of overall condition. Almost half (47 percent) of the roads are in poor or mediocre condition. West Virginia motorists lose approximately $372 million a year in vehicle repairs and operating costs on these roads. It would cost $779,713,543 for the state to repair or replace deficient highway bridges.

Advocacy groups believe that investing in infrastructure cannot only repair crumbling roads and bridges, but also promote much-needed job growth in West Virginia. Additionally, a study from the Political Economy Research Institute (PERI) states that infrastructure investments made by the federal government can create 18,000 jobs per billion dollars. With a 7.3 percent unemployment rate, more jobs created by infrastructure could be a real boost to the state economy. These jobs would be increasingly important since many do not require a college degree. About 41.6 percent of West Virginians would be eligible to obtain such employment.

Investment in infrastructure has steadily declined in West Virginia in terms of capital expenditures for new construction of roads and bridges. State budgets indicate that capital expenditures from the Division of Highways are at a five-year low. During Fiscal Year 2009-2010, West Virginia spent $1.04 billion on new infrastructure–$807 million on roads and $223 million on bridges. Fiscal Year 2013-2014 shows a sharp decline. Only $586 million is allocated for infrastructure–$381 million for roads and $204 million for bridges.

Source: West Virginia State Budget Office

Further investment into state infrastructure, whether new or repairs, could provide jobs to West Virginians looking for work today. Having a healthy, functioning infrastructure helps drive the economy and improves quality of life. For businesses to be competitive, goods and services must be able to be transported efficiently and economically. A working infrastructure system is key to prosperity.

Jobs Count Special Edition: Jobs (Mis)Count

Each month, we put out our Jobs Count publication, which reports on the state’s jobs numbers, using data from the Bureau of Labor Statistics Current Employment Statistics (CES). Each month, the BLS revises the previous month’s numbers, but the revisions are typically small, and usually don’t change the overall picture. However, at the beginning of each year, the BLS does a big revision, known as benchmarking.  This year state numbers were revised back to 2008, and this time the revisions completely changed West Virginia’s employment picture.

Before the revision, and as reported in our last edition of Jobs Count, West Virginia’s total non farm employment stood at 746,900 jobs in December. But after the revision, December’s jobs count was 765,500 jobs. The revision added 18,900 jobs to West Virginia, an increase of 2.5%. While most states saw an increase in total jobs with the revision, West Virginia had the second largest revision among the fifty states.

In fact, almost all of West Virginia’s employment sector’s saw significant revisions. The mining and logging sector had the biggest change, with the revision adding 3,100 jobs to December’s count, an increase of 10.5%. Only the education and health services sector saw a downward revision, subtracting 100 jobs.

So what do the revision’s mean for our previous Jobs Count reports? Most of our analysis for the past year+ is no longer accurate. For example, in our last edition, we reported that the state was 13,400 jobs below its pre-recession level in December, when after the revision, the numbers show that West Virginia was actually 5,500 jobs above its pre-recession level.

As the chart shows, total non farm employment grew faster in 2011 than initially reported, and the big job losses of 2012 were much smaller and lasted a much shorter amount of time. 

So when we reported that 2012 was shaping up to be one of the worst years for job growth since the recession, with 10 straight months of job losses, the revisions completely changed that. Instead of the state losing 13,900 jobs in 2012, with major losses for government and mining; the state gained 1,400 jobs, with increases coming from education and health services and leisure and hospitality.

Here’s another piece of analysis that looks completely different. On the five year anniversary of the recession, we noted that job growth had been mixed, with the state still below pre-recession levels. Now, after the revisions, we can see that the sectors that have lost jobs since the recession began have lost fewer jobs than we thought, while the sectors that gained jobs have gained more than we thought.

Because of the size of the revision, the narrative of the past two years of Jobs Counts reports has been off. What initially looked like a double dip recession in 2012 was actually slow growth. With the monthly estimates being this inaccurate, the Jobs Count reports lose their usefulness, and we’re doing a disservice in continuing to produce them. Going forward, we’re likely to change how we do Jobs Count to avoid these problems. On possible solution would be to use the Quarterly Census of Employment and Wages (QCEW) rather than the CES. The QCEW is more accurate and provides greater detail (for example, you are able to separate coal mining from natural gas drilling in the  QCEW but not in the CES), but in exchange for more accuracy, the data are several months old, and are released quarterly, not monthly. But if we are interested in what is happening to the state’s jobs market, accuracy is more important than timeliness.  As John Maynard Keynes (might have) said about changing his position on an economic issue, “When my information changes, I change my mind. What do you do?”

Line Items and Tables and Budgets, Oh My!

Governor’s Budget Includes $75 Million in Cuts

Yesterday the WVCBP released its analysis of the Governor Tomblin’s FY 2014 proposed budget. While the governor called for budget cuts from many state agencies, the state’s Rainy Day Fund totals over $900 million and is the third-largest in the nation. Read the full report here.

Children and Poverty

 The Senate Select Committee on Children and Poverty held its first meeting away from the Capitol on Wednesday in Fayetteville. Next, the Committee will travel to Beckley on March 20. Senators plan to travel across the state to hear directly from people impacted by poverty. Read more about the meeting here. During the legislative session, the Committee meets Wednesday at 10AM.

New York Times Gives In

After five years of phone calls and emails from the WVCBP, the New York Times finally caved in and gave economist Paul Krugman his own newspaper. Ladies and Gentlmen, the Krugman Times!

Learn About Medicaid Expansion in West Virginia

Governor Earl Ray Tomblin has not yet decided whether West Virginia will join the ranks of states choosing to expand Medicaid, thus providing health insurance for 120,000 West Virginians. He is the last undecided Democratic governor. Want to learn more? The WVCBP will cosponsor a forum and training on Sunday, April 7 on Medicaid Expansion. The event takes place from 2PM – 3:30PM at Christ Church in Charleston. Refreshments will be provided.

Evidence Counts – the WVCBP blog  

President Obama has called for an increase in the minimum wage and Congress is considering the Fair Minimum Wage Act of 2013. What would this mean to West Virginia workers? In his blog post this week, Sean lists the economic benefits to an increase in the minimum wage to $10.10 an hour. Over 190,000 workers would be impacted in the Mountain State.

WVCBP in the News

Governor Tomblin is hearing from health care advocates from across the state who are urging him to expand Medicaid to tens of thousands of West Virginians. This week Ted was quoted in the Charleston Gazette joining others who are asking the governor to take advantage of this opportunity to help so many low-income families.

Senator Unger blogged in his hometown newspaper this week about the work of his Select Committee on Children and Poverty. Here’s what he had to say about the WVCBP and his committee’s progress.

We Are Hiring  

The WVCBP is currently accepting resumes for the position of Outreach Coordinator. Read more about the position here.

191,000 Workers in WV Would Benefit From a Minimum Wage Increase

A new report from the Economic Policy Institute looks the economic impact of Fair Minimum Wage Act of 2013, which was introduced in Congress in response to President Obama’s call to raise the minimum wage made during this year’s State of the Union address. The Fair Minimum Wage Act of 2013 would raise the minimum wage to $10.10/hr through three incremental increases of $0.95/hr, and then index it to inflation. The minimum wage has not kept up with rising inflation; today’s minimum wage is lower than it was in 1968 after adjusting for inflation. The minimum wage is also insufficient to keep a minimum wage earner’s family out of poverty, unlike in the past, and it has not risen with increased productivity and an expanding economy.

In West Virginia, an estimated 191,000 workers would see higher wages because of the minimum wage increase, both directly and indirectly. Raising the minimum wage to $10.10/hr would increase the wages of these workers by a total of $360 million, or an average of $2,444 annually per worker. The increase in wages would stimulate demand for goods and services, increasing the state’s GDP by $228 million, and help create 900 jobs.

While the perception exists that many minimum wage earners are simply teenagers with part-time jobs, the reality is that the most of the beneficiaries of an increase in the minimum wage are adults working full time to support their families. For example, in West Virginia:

Over 90 percent of the beneficiaries of a minimum wage increase are over the age of 20.

Nearly 60 percent work full time, and nearly 90 percent work at least 20 hours a week.

More than 28 percent have children, while over 41 percent are married.

Almost 84 percent have at least a high school education, while almost 38 percent have at least some college education.

In addition, 25% of children in West Virginia live with at least one parent who would benefit from an increase in the minimum wage. The 191,000 workers in West Virginia who would benefit from a minimum wage increase earn on average 52% of their family’s income, and 19.5% of them are their family’s sole provider of income. An increase in the minimum wage would also benefit women, who make up 60% of those who would see a wage increase in West Virginia.

For West Virginia, increasing the minimum wage would boost the incomes of some of the state’s hardest workers, help families, and spur economic growth. In the past decades, wage increases for working families in West Virginia have been scarce. Increasing the minimum wage would help reverse that trend.