Breaking Down the Pay Raise and Budget Cuts Deal

The teacher and school service personnel strike came to an end on Tuesday with an announcement of a five percent salary increase for all state employees. This ended the standoff between the House, which wanted a five percent raise for teachers and a three percent raise for other state employees, and the Senate, which proposed a four percent raise for teachers and other state employees.

While the Senate agreed to a higher pay raise then they initially said could be afforded, they remain wary of the governor's revised revenue estimates. Therefore, the deal reached between the governor, House, and Senate calls for the pay raises to be paid for through budget cuts, rather than relying on potential revenue increases. After some conflicting statements from Senators about what may be cut from the budget, this amendment to the budget bill from the Senate Finance Committee details where those proposed cuts are coming from.

The governor's proposed budget already included a one percent across the board raise for all state employees, at a cost of $19.6 million. This means to pay for the five percent raise with budget cuts, the legislature would have to eliminate in the neighborhood of $80 million from the governor's proposed budget. In addition, the Senate budget appropriates $21 million from the General Revenue Fund for a PEIA subsidy to freeze potential premium hikes.

Most of the cuts in the Senate's budget come from eliminating funding increases proposed by the governor. For example, the Senate budget eliminates the $14 million increase for the Division of Tourism proposed by the governor, as well as $30 million in increases for the the WV Development Office. The Senate also reduced the governor's appropriation for Infrastructure and Economic Development Projects from $5 million to $3 million. Overall, after accounting for the pay raise and budget reductions, funding for the Department of Commerce is $44.8 million below the governor's original proposal.

Another major reduction from the governor's proposal is in the Division of General Services. Governor Justice proposed $24.1 million for capital outlays under the Division of General Services, a $20 million increase over FY 2018, that was to be used for maintenance and repairs on state-owned buildings. The Senate budget reduced that to $16.1, an $8 million reduction.

The Senate budget also eliminates the $7 million the governor appropriated as funding for the state's free community college proposal. Without the funding, that proposal appears to be dead.

The Senate budget also reduces the general revenue appropriation for Medicaid by $24 million. This is at least partially offset by an $8 million appropriation from excess lottery surplus in the Senate budget bill. The general revenue appropriation for Medicaid had already been reduced by $100 million in the governor's proposal, due to the availability of unused Medicaid appropriations from prior years, due to lower than expected costs. The governor has stated that there will be no cuts to Medicaid, but it is unclear if the general revenue reduction is being offset with other funds. It should be noted that the federal match for Medicaid remains the same in both the governor's proposed budget, and in the Senate's budget, implying that there is no changes to the state's overall spending on Medicaid. Based on comments from the Senate communications director, this extra funding will likely come from redirecting $26 million in worker's comp and highway revenue.

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Those general revenue spending reductions total $85 million, enough to cover the cost of the five percent pay raise. The combined effect of the budget cuts, pay raises, and PEIA subsidy results in an overall $25.7 million or 0.6 percent increase in general revenue appropriations over the governor's FY 2019 proposal, and a $156.8 million or 3.7 percent increase over the FY 2018 general revenue budget. The increase in general revenue over the governor's estimate is likely due to redirecting worker's comp and highway revenue, as mentioned above. The table below compares departmental total appropriations from general revenue for FY 2018, the governor's proposed FY 2019 budget, and the Senate's amended FY 2019 budget. A spreadsheet comparing line-item appropriations between the Governor's proposed budget and the Senate can be downloaded here.

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