Although the state's budget for the next fiscal year shows no
revenue growth and no surplus, experts from both government and education say
things will get better.
Paul Speaker, an associate professor of finance in West
Virginia University's
College of Business
and Economics, told lawmakers during a Feb. 13 meeting that the state's
demographics contribute to the overall economy. For instance, West
Virginia ranks third in the nation for oldest
population relative to the median age and second oldest in terms of individuals
aged 65 or older. This aging population demands certain things from the
economy, Speaker said, such as health care and financial services. Both of
those sectors are expected to grow over the next five years.
"We've had very steady growth in the health care sector in
terms of jobs," Speaker said, nothing the sector grows at about 2 percent
annually. That trend is expected to continue.
"We will have to take care of an older population," he added.
"There will be more health care costs. We do have problems that need attention
and treating those … it does mean there are more jobs. So whether you consider
the good news or bad news on that one, they're both there."
Health care jobs typically may more than the median wage, and
wage growth also is projected. Speaker said additional health care jobs are
anticipated to take gross state product from its current 9.12 percent to 9.66
percent by 2017.
But the health care situation isn't an overall pretty
picture. State officials have long projected rising Medicaid costs and a
decrease in the federal match rate. In anticipation of the rising cots, Gov.
Earl Ray Tomblin last year asked state agencies to cut 7.5 percent from their
budgets. According to Mark Muchow of the Department of Revenue, the debate
surrounding Medicaid funding will continue to hound state government until a
solution is found.
One problem with Medicaid, Muchow said, is West
Virginia has closed the gap in terms of per capita
income. While that's an overall positive thing, it does affect how much federal
money the state's Medicaid program receives. Every state is guaranteed a 50
percent match rate, he said. The match rate at one point was higher than 80
percent; that has since declined to about 71 percent. Each time the match rate
drops a percent, it costs the state about $30 million.
The overall growth rate for Medicaid, Muchow said, is 5.5
percent while the average long-term growth of the state's general revenue fund
is 3.5 percent. But that's a problem states across the country are
experiencing. Medicaid grows faster than the economy, Muchow said.
Another way the state can help the aging population is by
expanding the professional business services sector, primarily financial
services. Workers need help planning retirement, and seniors especially could
use similar services, Speaker said.
"This is going to be an important part of our economy for the
next several years," he said. We are underserved relative to the rest of the
nation."
While that presents a problem now, it's an opportunity for
the future because students will be looking at what jobs are available and what
degrees to get, he said.
Muchow is expecting growth this year, albeit
slow. That's a nationwide phenomenon, though, he pointed out. Nationally, 2013
won't be as good of a year as 2012, and some of that slow down in growth is
attributed to the federal budget negotiations, the end of the payroll tax cut
holiday and other tax increases.
However, Muchow said inflation shouldn't be a worry. He
expects inflation to remain fairly tame and the Federal Reserve is working to keep
interest rates low through the next couple of years. Consumption is in line
with growth in income, Muchow said. Payroll and employment are slowly growing,
he said, but that's still growth.
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