WV Center on Budget and Policy > Publications > Tax and Budget > State Budget > The Governor’s 2016 Budget: More Austerity, Less Prosperity

The Governor’s 2016 Budget: More Austerity, Less Prosperity

March 2, 2015

Governor Tomblin’s proposed 2016 budget continues the state’s recent trend, with a number of cuts and transfers needed to balance the budget, as the state’s revenue problem has yet to be solved. The Rainy Day Fund will once again be tapped, and bills will need to be passed by the legislature to divert previously dedicated revenue. Another round of cuts, the bulk of which target higher education, also helps balance the budget. Fortunate budgetary circumstances, including better than expected investment returns and a drop in the state’s K-12 enrollment, prevented deeper budget cuts and greater borrowing from the Rainy Day Fund. This brief examines those priorities, from both the spending and revenue sides, and includes recommendations to strengthen the budget invest to secure the state’s future. Read PDF of report.

Key Findings:

  • Appropriations from the base budget total $4.675 billion, but additional appropriations from the Rainy Day Fund and surplus supplementals will increase total expenditures.
  • The governor is proposing using $25 million from the Rainy Day Fund and $72 million in budget cuts, among other actions, to close a projected $195 million budget gap.
  • Falling K-12 enrollment and other adjustments to the school aid formula softened the impact of the budget cuts.
  • Higher education is once again facing cuts, with state investment in higher education at an eight-year low for 2016.
  • With little room in the budget for pay raises, West Virginia public employees remain among the lowest paid nationally. The state also faces serious unaddressed challenges, including an unhealthy, undereducated workforce and too many children living in poverty.
  • Growth in budget revenues is slow compared to the past. Adjusting for inflation, base budget revenues are $685 million less in 2016 compared to 2008. In 2014, General Revenue Fund collections relative to the economy were lower than at any time since 1990. If General Revenue Fund collections were at the average share of the economy, the state would have collected $431 million more in revenue in 2014. Since the recession, state revenue growth has lagged behind other states, growing only by 4.8 percent compared to 7.4 percent nationally.
  • Between 2014 and 2020, the only major sources of revenue growth are from the Personal Income, Sales & Use, and Severance Taxes. Over the last several years, the reliance on volatile Severance Tax revenues has grown from four percent of General Revenue Fund revenues in 2000 to 12 percent in 2014, while business taxes have declined from 8.3 percent to five percent.
  • To make smart investments to grow a more productive, healthier, and vibrant economy, the state will have to find additional resources. This could include modernizing the Personal Income and Sales Tax, increasing taxes on tobacco and alcohol, ending inefficient business tax credits and breeding subsidies, closing corporate tax loopholes, and ensuring that the state always benefits from its rich mineral resources by strengthening the WV Future Fund.