Budget experts: Don't' expect a surplus this fiscal year - WTRF 7 News Sports Weather - Wheeling Steubenville

Budget experts: Don't expect a surplus this fiscal year

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Gov. Earl Ray Tomblin often boasts of the state's economic well-being.

Although the state's budget looks pretty good compared to other states in the union, things may soon change.

At the Feb. 7 Associated Press Legislative Lookahead, state budget experts told reporters the budget for Fiscal Year 2014 would include no revenue growth.

Under state law, the governor must submit a balanced budget to the Legislature, and State Budget Office Director Mike McKown said this year's balanced budget is partly a result of the 7.5 percent budget cuts Tomblin requested of some state agencies.

"When you do that, the 7.5 percent cut got us right about $75 million," McKown said. "It amounts to more, like when you exclude public education and Medicaid and corrections because those, certainly Medicaid, are why we have to do these cuts.

"Higher education was not excluded. They were subject to a 7.5 percent cut and they adhere to those instructions."

Tomblin did allow for some exemptions to the cuts. Medicaid, other post-employment benefits and three-quarters of the state budget not subject to cuts.

The budget cuts were necessary, McKown said, because the state was looking at a $389 million deficit when it started the budget process last year.

The $75 million that comes as a result of the budget cuts along with a one-time use of excess cash totaling $100 million bring the budget back in line, he said. An $82 million surplus in the state's lottery fund and $7 million left in general revenue help, too.

"It will all add up," McKown said. "It's a combination of both — using surplus funds, next year's expected revenue projections and budget reductions."

Rising health care costs are mostly to blame for the tight budget.

McKown said the state's share of Medicaid costs will increase because federal match rates decreased. In years where the federal match rate was higher, the state set aside some money to help offset the costs in future years.

"We banked that money during those years and put it in a trust fund," McKown said. "The trust fund grew modestly, but now our federal match rate is down in the 72 percent range."

At one time, the federal match rate was around 80 percent, McKown said. Each time the federal match rate decreases a percent, it costs the state $30 million.

West Virginia isn't the only state dealing with rising health care costs. Mark Muchow, deputy cabinet secretary of the West Virginia Department of Revenue, said Medicaid, Social Security and Medicare all need reforming at the federal level.

"It's not a West Virginia problem; it's a national problem," Muchow said of Medicaid.

"Something has to happen in those three programs," he later added.

On the revenue side, McKown said he doesn't think the lottery fund will increase significantly over the next year or so. The fund's revenue estimate for fiscal year 2013 is significantly lower than estimates for fiscal year 2012, he said. And from 2013 on, revenue is expected to remain flat.

According to Muchow, the lottery fund's peak year was 2007. Since then, it has steadily decreased, thanks to new casinos in Ohio and Maryland. However, those casinos had trouble getting started, so West Virginia's lottery revenue fund saw slight increases in 2011 and 2012.

"Our lottery director has been conservative in his budgeting process," said Delegate Harry Keith White, D-Mingo and chairman of the House Finance Committee.

He said there has been a surplus in the lottery fund each of the seven years he has chaired the committee.

Delegate Tim Armstead, R-Kanawha, serves as the House Minority Leader. He said some of the state's policies and direction over the last couple of decades are to thank for today's sound budget.

But, he said, there's room for improvement. According to Armstead, four factors determine growth in a state budget: tax structure, infrastructure, the legal climate and the education system.

"Bold changes in each of those areas if we are to turn this around," he said.

Job creation is one way to increase the tax base, he said.

"If you're not going to raise taxes, which I hope we don't and I think we're doing everything we can to prevent that, you're going to have to increase tax base," Armstead said. "We also need to look at our tax structure, our legal climate and our infrastructure" in addition to education.