West Virginia’s budget basics

According to the National Association of State Budget Officers (NASBO), West Virginia’s total expenditures in fiscal year (FY) 2019 were $18.3 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, West Virginia’s combined state and local direct general expenditures were $16.4 billion in FY 2017 (the most recent year census data were available), or $9,012 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

West Virginia’s largest spending areas per capita were public welfare ($2,763) and elementary and secondary education ($1,706). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

West Virginia’s combined state and local general revenues were $16.3 billion in FY 2017, or $8,972 per capita. National per capita general revenues were $9,592. West Virginia uses all major state and local taxes. After federal transfers, West Virginia’s largest sources of per capita revenue were charges ($1,461), such as state university tuition and highway tolls, and individual income taxes ($998).

West Virginia’s politics

Governor Jim Justice, a Republican, was elected in 2016 with 49 percent of the vote. (Governor Justice was elected as a member of the Democratic Party but changed his party affiliation to Republican in 2017.) The next gubernatorial election is in 2020.

Republicans control both the House of Delegates (59 Republicans to 41 Democrats) and Senate (20 Republicans to 14 Democrats). Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in West Virginia. All West Virginia House seats are on the ballot in 2020 because delegates serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2020, and the other half will be up for election in 2022.

West Virginia’s budget institutions, rules, and constraints

West Virginia uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. West Virginia does not have any tax or expenditure limits. West Virginia does limit total authorized debt incurred by the state but not debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

West Virginia’s recent fiscal debates

• West Virginia teachers went on strike in 2018 and 2019 to protest the state’s K–12 education spending and proposals to allow charter schools in the state. In March 2019, Governor Justice convened a special legislative session on education, during which the legislature approved a bill that raised teacher salaries and allowed counties to authorize charter schools. The legislature also considered legislation in 2019 that would ban strikes by public employees, —including teachers. The bill passed in the Senate but not the House.
  
• In 2019, Governor Justice signed legislation that fully exempts all Social Security income and military pension income from the state’s income tax. Before the legislation, West Virginia treated Social Security income the same way the federal government treats it (it is taxed only if the filer has other income sources and earns above a certain level of income) and offered a $20,000 exemption for military pension income. West Virginia offers a $2,000 exemption for public pensions (unless it is a West Virginia pension, which is fully exempt from tax) and no exemption for private pensions. The state estimates the new exemptions will reduce revenue by $25 million annually when fully implemented.
  
• West Virginia collects a relatively large amount of revenue from severance taxes (taxes on the extraction of natural resources such as oil, natural gas, and coal). In 2017, these taxes accounted for 2 percent of West Virginia’s state and local general revenue. Severance taxes provided a larger share of general revenue in only Alaska, New Mexico, North Dakota, and Wyoming in 2017 (the US average was 0.3 percent). However, severance tax revenue is inherently volatile and difficult to predict because it tracks prices and production. In November 2019, the West Virginia Department of Revenue reported severance tax revenue was down 45 percent from the prior year. The department also reported that because West Virginia is so reliant on the natural gas and coal industries, the slowdown was also reducing the state’s individual income tax collections. As a result, the state anticipated a revenue shortfall during the 2020 fiscal year and possible spending cuts in the upcoming 2021 budget.

West Virginia’s current budget

Governor Jim Justice announced his proposed FY 2020 budget in January 2019. The governor’s plan included a 5 percent pay raise for teachers and further salary incentives for recruiting and retaining teachers in math, science, foreign languages, and special education. Another priority in the governor’s budget proposal and 2019 state of the state address was the opioid crisis. He recommended spending $45 million on an initiative named “Jim’s Dream,” which supported drug use prevention, drug abuse treatment, job training, and expungement of misdemeanor drug offenses.

The legislature passed its budget in March 2019. The enacted budget was generally in line with the governor’s proposal, including his proposed funds for education and Jim’s Dream.

Governor Justice released his proposed FY 2021 budget and gave his 2020 state of the state address in January 2020.

For more on West Virginia’s budget, see

• the West Virginia State Budget Office,
  
• the West Virginia State Treasurer, and
  
• the West Virginia Joint Committee on Government & Finance.

West Virginia’s economic trends

West Virginia’s per capita income (per the Bureau of Economic Analysis) was $42,336 in 2019, ranking 49th among the states. It was below both the national average of $56,663 and the Southeast regional average of $49,145. The state’s median household income (five-year estimate) was $44,921 in 2018, ranking 49th among the states and below the national average of $60,293. West Virginia’s poverty rate was 17.8 percent in 2018 (five-year estimate), above the national rate of 14.1 percent.

Although West Virginia’s averages tell a story about the entire state, West Virginia is composed of diverse localities. For example, the city of Huntington’s median household income was $30,362, and its poverty rate was 32.7 percent; the city of Bridgeport’s median household income was $80,666, and its poverty rate was 4.1 percent.

West Virginia’s unemployment rate has historically followed national trends. While the state’s rate trended below the US rate following the Great Recession, in recent years the state’s rate has been among the highest in the country. (See how COVID-19 is affecting state employment and earnings data.)