Officials hopeful as unemployment rises
CHARLESTON — Gov. Jim Justice continues to remain positive about using federal coronavirus money to backfill cratering tax revenues or a new bailout by Congress, while the state unemployment jumps to an all-time high.
According to Workforce West Virginia, the state’s seasonally adjusted unemployment rate jumped from 6.1 percent in March to 15.2 percent in April – the first time the state unemployment rate has been that high since January 1984. According to the U.S. Bureau of Labor Statistics, the national unemployment rate was 14.7 percent.
Total unemployment jumped from 49,700 in March to 117,100 in April. Total employment dropped from 773,600 in March to 654,500 in April. According to Justice, the state has received more than 200,000 claims for unemployment benefit and has processed more than 170,000 claims, paying out more than $500 million in unemployment benefits.
Scott Adkins, the acting director for Workforce West Virginia, said Wednesday he expects the unemployment rate to peak next month before coming down.
“I can tell you (15 percent) will not be the peak,” Adkins said. “If you look at the trends, we’re probably going to peak out at 20 percent or 21 percent and maybe as high as 22 percent. Obviously as the economy opens back up and more folks go back to work, that should level off, but I’m pretty confident that next month’s numbers are probably to be just north of 20 percent.”
“As we get on from the standpoint of into June and we get the true May numbers, we’re going to fall some more I believe as far as the real statistic of total unemployment,” Justice agreed.
The unemployment figures were reflected in state tax revenue numbers for the month of April. tax collections for the state’s General Revenue Fund came in 33 percent below the adjusted revenue estimates set in January by the Department of Revenue. Year-to-date tax collections of $3.692 billion were $198.7 million less than estimates, putting the state 5 percent below collections with just two months left in fiscal year 2020.
“I think when we collect the May numbers on unemployment, naturally we’re going to dip even greater than the 15 percent-plus situation we’re at today, but that’s not the numbers I’m looking at,” Justice said. “I’m looking at the revenue that’s coming in and all the different taxes, whether it be sales tax or whatever. I’m encouraged by the numbers that we’ve got.”
State revenue officials have predicted as much as a $500 million budget deficit by the end of the fiscal year which ends June 30. The state constitution requires West Virginia to end every fiscal year with a balanced budget. Justice said early indicators suggest that the end-of-year deficit won’t be as bad with businesses slowly opening back up and consumer spending expected to improve.
Justice, who met with Department of Revenue officials Tuesday evening, said Wednesday that May tax collections would definitely come in below projections of $334 million, but would come in more than at just under 25 percent of projections for the month, which was less of a drop than they were expecting.
“Our collections are really a pleasant surprise,” Justice said. “Our collections are mildly better than what we projected, not from what we projected in the beginning but how we modified it and projected from the standpoint of what we thought we were going to have with this pandemic on our hands. That’s good.”
Justice has continued to express hope that new guidance will be issued by the U.S. Treasury Department to allow the use of part of the $1.25 billion the state received from the federal C.A.R.E.S. Act for budget backfill. So far, the Treasury Department will only allow the money to be used for direct coronavirus-related expenses by state, county and city governments.
The U.S. House of Representatives passed the $3 trillion Health and Economic Recovery Omnibus Emergency Solutions (H.E.R.O.E.S.) Act. The bill included $1 trillion for state and local government shortfalls. That piece of legislation is not expected to be taken up by the U.S. Senate, but U.S. Sen. Joe Manchin is co-sponsoring a bipartisan bill that includes $500 billion in flexible funding for states, including $2 billion for West Virginia.
Manchin said the State and Municipal Assistance for Recovery and Transition (S.M.A.R.T.) Act would distribute funding to states based on population size, infection rates, and revenue losses. But the Senate doesn’t plan to convene until after Monday, June 1, putting states in a bind as the fiscal year comes to a close at the end of that month. Manchin said he would continue to pressure the U.S. Treasury to allow more flexibility for C.A.R.E.S. Act funding.
“I can assure you if something is not done by June 1st, we will ask for immediate clarification that states can at least use 40 or 50 percent of the money that they have,” Manchin said during a conference call Tuesday. “I’d be happy with West Virginia…being able to backfill using at least up to $500 million or $600 million of that.”
As the June 30 deadline looms, state lawmakers are getting concerned. If approval is not given to use the C.A.R.E.S. Act funding for the budget shortfall or if Congress doesn’t pass another coronavirus relief package with money for state budgets, the West Virginia Legislature will need to meet in a special session to move money from the Revenue Shortfall Fund, also known as the Rainy Day Fund. Lawmakers could also make supplemental appropriations.
Delegate Randy Swartzmiller, D-Hancock, wrote a letter to Justice this week seeking details and clarification on when lawmakers can expect to be recalled to Charleston for a special session. Swartzmiller, a candidate for the West Virginia Senate in the 1st District, said lawmakers need clear guidance.
“While I would like to remain optimistic that the federal government will provide monetary relief to West Virginia, what if it doesn’t,” Swartzmiller asked. “What’s our plan? Who’s developing it? Do we have economists on our team? What adjustments have to be made? When do you plan on sharing your data with the legislature?”