2008-2009 State Budget
January 11, 2008

As we work on developing the 2008-2009 state budget, legislators are very fortunate to be working with a budget surplus. Needless to say, that hasn’t always been the case. While we debate how to spend the additional, unexpected income, legislators always keep in mind that the situation can quickly change.

Our economy is in good shape right now, but the long-range forecast doesn’t show it necessarily staying that way. So while we want to do what we can to give back what we can, we also need to prepare for the future, and that’s why it is so important to spend within our limits. It’s all about fiscal responsibility.

Past legislatures decades before us did not prepare for the future, and as a result, the Legislature has had to work very hard over the last 15 years to address the unfunded liabilities within our state pension systems that were caused by financial neglect. In recent years we’ve reduced that unfunded liability payment significantly. The previously scheduled payment would have risen to about $750 million a year; we’ve gotten that down to $285 million a year.

In addition, we’ve maintained a very well funded "rainy day fund." A report by the National Governors Association gave West Virginia a very high ranking for maintaining one of the largest rainy day funds in the country as a percentage of annual spending. Our persistence in consistently saving money for emergencies, such as natural disasters or a critical fiscal need, also has received recognition by bond rating agencies.

The Association’s Fiscal Survey of States notes that bond rating agencies recommend reserving at least 10 percent of a state’s spending for emergencies. This budget year, West Virginia saved 13.2 percent, the fourth-best margin in the country, according to the survey.

The revenue shortfall reserve fund is funded from surplus revenues at the end of each fiscal year, on June30. The first 50 percent of any surplus revenues are deposited to the credit of the fund, which law dictates must be funded continuously and on a revolving basis.

According to state law, the governor can convene a special session in order to make a supplemental appropriation from the rainy day fund in order to avoid the drastic step of reducing appropriations. The government can also borrow money from the rainy day fund in certain circumstances to avoid the imposition of a reduction in spending authority. Any funds borrowed must be repaid, without interest, and redeposited to the credit of the revenue shortfall reserve fund within 90 days of their withdrawal.

This fund, combined with the Legislature and governor’s commitment to paying down our public pension debt, has paid off. This time last year, Fitch Ratings, one of three agencies that assign credit ratings to bonds issued by the State of West Virginia, upgraded its credit rating of the West Virginia Economic Development Authority lease revenue bonds from A to A+. Last February, Fitch also assigned an A+ rating to the West Virginia School Building Authority capital improvement bonds.

So during the past few years, we’ve been in a position to cut taxes – a point of pride considering the conditions of economies in other states. I am told we were one of only 23 states able to cut taxes in 2007. We cut taxes by a total of about $79 million, while 18 states raised their taxes.

I welcome and appreciate your input on these or any other legislative issues. Write to House Majority Leader Joe DeLong, Building 1, Room 228-M, 1900 Kanawha Blvd. E., Charleston, 25305, or joe@joedelong.com, or call 304-340-3220.