Revenue: Legislators must use caution on spending
In a few days, West Virginia lawmakers and Gov. Jim Justice will get an idea of how happy the new year will be for them. It will come in the form of the state government revenue report for December.
That will mark the halfway point for the fiscal year, which has been decidedly mixed in terms of income to keep government functioning. At first, it seemed as if Justice and lawmakers had struck it rich. Revenue was far in excess of what had been budgeted for spending.
That spurred Justice to make two grandiose promises, on which legislative leaders agreed: First, state employees, including teachers, would receive another 5 percent pay raise in 2019. Second, the state would increase its contribution to the Public Employees Insurance Agency by $100 million.
Then the revenue stream slackened. By the end of November, collections for the general revenue fund were just $141 million above estimates — less than will be needed to keep the PEIA and pay raise pledges. The state road fund was lagging badly.
And analysts were warning the situation may get worse, not better. State Deputy Revenue Secretary Mark Muchow — who has a reputation for well-founded conservatism on fiscal matters — told lawmakers much of the boom earlier this year was because of revenue linked to oil and gas pipeline construction. Many of those projects will be completed next year, and the resulting drop-off in revenue “will be very noticeable,” Muchow cautioned.
On Jan. 9, legislators will begin their annual 60-day regular session. Some already have begun discussing the fiscal 2020 budget.
Obviously, the December, January and February revenue reports will provide crucial guidance to those writing the new budget. For now, however, it is clear any big, new spending initiatives will have to be approached with caution. We don’t want to return to the bad old days of mid-year spending cuts because budgets were based on unrealistic optimism.