Justice issues orders to help balance budget
CHARLESTON — As the fiscal year for 2020 came to a close Tuesday, Gov. Jim Justice released two executive orders to ensure the state ended the year with a balanced budget as required by law.
The plan is to release further information at today’s coronavirus briefing.
In the first executive order, Justice borrowed $68 million from the state’s Revenue Shortfall Fund, also known as the Rainy Day Fund, to pay the state’s obligations. State code allows for the borrowing of money from the Rainy Day Fund, though the money must be replaced within 90 days.
The move is a common one used by governors to balance the budget at the end of a fiscal year. Justice borrowed $70 million last year, $60 million in 2018 and 2017, and previous governors Earl Ray Tomblin and Joe Manchin did the same several times during their terms to balance the budget at the end of the fiscal year.
State code only allows money to be removed from the Rainy Day Fund in the amount necessary to meet the state’s obligations and it can’t exceed 1.5 percent of the general revenue estimate for the upcoming fiscal year. According to the State Budget Office, both Revenue Shortfall funds have a combined total of $842.8 million as of May.
In the second executive order, Justice ordered state departments and agencies within the executive branch that report to the governor to implement spending reductions in the fiscal year 2020 budget. According to the order, the state needs to close a $255 million revenue shortfall.
According to the executive order, the shortfall was caused by reduced tax income from the personal income tax and the severance tax on coal and natural gas. Justice signed an executive order on March 25 moving the state’s income tax filing deadline from April 15 to July 15. That caused a $206 million shortfall in personal income tax revenue. Severance tax revenue came up short by $93 million.
As a result, state departments and agencies were asked to reduce their spending authority by a combined $198 million, with the Department of Revenue expecting $57 million in additional revenue to make up the difference.
To come up with the $198 million, Justice is sweeping $186 million from the Department of Health and Human Resources. The state also is sweeping $2 million from the Department of Education, $1 million from the Department of Commerce and $9 million from the Department of Homeland Security (formerly the Department of Military Affairs and Public Safety).
In a clarification released Tuesday evening, the governor’s office said the sweeping of accounts was not a budget cut. The $186 million being swept from DHHR was being offset with other funding, including C.A.R.E.S. Act funds with no reduction in Medicaid services. Additional funding is coming from surplus dollars in the Medicaid line item due to an increase in the federal Medicaid match rate. The remaining $12 million is coming from funds that were set to expire at the end of the fiscal year.
Tax revenue for the fiscal year that started last July came in below estimate for the first few months, causing the Department of Revenue to start preparing state departments and agencies for a possible mid-year budget cut last fall. Tax revenue started to stabilize in December 2019, coming in above estimate every month except February.
That all changed when the coronavirus pandemic forced Justice and state health officials to start shutting down some businesses in March, with a full shutdown of all non-essential businesses by executive order on March 23. According to the Department of Revenue, the state was projected to end the fiscal year with a deficit of $525 million based on estimates in April.
Yet, while tax revenues came in below estimates in April and May, they came in better than what Revenue Department officials thought they would. Justice Friday said that they thought the state would end the fiscal year under by $285 million.
Also helping the state is the $1.25 billion in federal funding made available to state, county, and city governments by the C.A.R.E.S. Act. While that funding can’t be used for budget backfill, it can be used for reimbursement of expenses the state incurred in fighting the coronavirus pandemic. While the state has not sought reimbursement yet, the State Auditor’s Office puts the state’s coronavirus expenses at $114 million.