Every year on the opening day of the legislative session, the Governor’s financial team holds a background briefing for the press on the state’s condition and the proposed budget for the next fiscal year. For the last four years, it’s been a gloomy affair with explanations of a struggling economy, flat or declining tax collections, no pay raises for public employees and budget shortfalls.
What has followed has been a fiscal tug-of-rope where the Governor and policy makers have to decide how to allocate scarce resources, whether taxes should be raised or spending cut, whether to dip into the state’s savings account—the Rainy Day Fund—to pay the bills.
So it is understandable that during yesterday’s briefing the budget team was more relaxed, perhaps even buoyant (at least by accountant standards) while discussing West Virginia’s financial picture. Yes, things are better.
Halfway through the fiscal year revenue collections are running ahead of projections for the first time in five years. The Rainy Day Fund is over $700 million, which represents nearly 16 percent the size of the general fund, which pleases the New York credit rating services.
The energy sector—the biggest driver of the state’s economy—continues to rebound. Coal production is up 15 percent over the previous year and natural gas prices are 60 percent higher than 2016 levels. Exports—primarily coal—are up 52 percent.
The state’s unemployment rate is declining, down to under five percent, while there is some modest growth in employment. Construction employment is expected to rise faster with the massive road building project the state is undertaking.
The six year budget outlook for the state is totally in the black, and that’s the first time that has happened in recent memory. As one of the budget officials said, “We’ve turned the corner.”
The economic recovery is strong enough that Governor Justice is proposing no tax increases—remember last year this time he called for nearly $500 million in new taxes—and he’s proposing a one-percent pay raise for teachers and state workers. That’s not a lot, but it’s better than recent years when nobody got raises.
All this is why the Governor was ebullient last night during his State of the State address. Justice, an unfailing optimist, thinks his vision of a growing, succeeding West Virginia is beginning to take shape.
Yes, the state’s economy has improved. Those numbers laid out by the budget people are real. But despite all the official optimism and the recent proclamation from President Trump that the state is doing “fantastically,” West Virginia’s economy is not exactly on fire.
Things were so bad over the last four years that any growth can be overstated because it’s compared with especially lean times. Dr. John Deskins from WVU’s Bureau of Business and Economic Research was measured in his annual report to legislators yesterday.
“The good news is we’ve finally hit bottom,” Deskins said. “After a period of years where the state lost about 26,000 jobs, there’s been a recent—although partial—bounce-back.”
Even if the recovery is modest, it feels, well, hopeful. In West Virginia we value good economic news because we don’t get as much as we would like. Call it “turning the corner” or a “bounce-back,” whatever. At least the news is positive, and based on the projections, that trend should continue.