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The state budget is the talk of the Capitol.
Each chamber alternates taking the lead on the budget, and this is the Senate’s year. The version passed out of Senate Finance on Monday makes several high-level moves.
Governor Morrisey identified roughly $125 million in offsets in his proposed budget — enough to cover a 5 percent personal income tax reduction. He left it to the Legislature to find the remaining 5 percent. With an election approaching, many lawmakers feel that left them in a tough spot: the appeal of an additional tax cut compared to the state’s ability to afford it.
Senate Finance proposed a tax on vape products expected to raise about $22 million, leaving $103 million in additional offsets it identified to close the gap. An offset is a budget tradeoff… choosing to cut or not fund some spending, or raise other revenue, to pay for a tax cut or new spending while keeping the budget balanced.
This document (Budget Presentation FY2027 with Surplus explanation) and the Senate’s budget bill outline broadly where those maneuvers occur.
Another major change involves Medicaid. The Senate moved Medicaid funding to the front of the budget, meaning it would be funded with general revenue. The Governor’s version contemplated using surplus dollars — revenue collected above official estimates. Surpluses may or may not come to fruition based on actual collections as remitted to the state. Granted, West Virginia has ran surplus after surplus in recent years, some say because of artificially lowered revenue estimates as set by the governor.
Medicaid is best presented in the front of the budget, a good move on the Senate’s part.
The Hope Scholarship is another major edit, at least in how it is funded. Hope was moved to the back of the budget to be funded with surplus dollars. The Senate reduced the Governor’s request by $38 million based on revised utilization rates presented by State Treasurer Larry Pack. Should a staple like Hope be in the back of the budget as opposed to the front? That’s debatable depending on your financial philosophy and bents around cashflow management.
Whether funded from one bucket or another — general revenue or surplus — both programs must ultimately be paid for.
Medicaid is non-negotiable because underfunding risks losing federal match dollars. That’s a non-starter.
Hope participants likewise expect their scholarship dollars, and state code establishes eligibility requirements creating a clear obligation for the state – at least for now minus any changes. And if changes are made, they likely won’t be well received. Who wants to give up a benefit they are currently realizing? Nobody.
Here’s what really sticks out. Practically speaking, both the Senate’s version and the Governor’s version of the budget would spend nearly every dollar the state could reasonably expect to collect – general revenue or surplus. That leaves little to no cushion and limited if any contingency planning.
Anyone who manages a budget is getting nervous right about now.
Traditionally, back-of-the-budget items are treated as “nice to haves” if finances allow. Not all surplus dollars are typically allocated in advance, preserving flexibility for unforeseen needs — items like emergency support for Hancock County Schools when it could not meet payroll due to financial mismanagement. Senate Finance advanced an $8 million measure Tuesday for that purpose, funded from unallocated surplus dollars.
What happens if another school system finds itself in need in fiscal ’27 when monies aren’t there for supplemental funding bills?
Timing also matters. Passing a budget from Committee this early from the lead chamber — on day 34 — allows the House to potentially move quickly. If both chambers agree on a budget and pass it before adjournment, lawmakers retain leverage to override any line-item vetoes from the governor. That becomes much harder once the session ends.
Politically, Governor Morrisey has more allies in the Senate than in the House. House Finance Chairman Vernon Criss is known for fiscal prudence and is not considered a Morrisey ally. Some fiscally conservative senators may be quietly counting on Criss to take a harder line on spending — or on the size of any tax cut.
That turns focus to Thursday when Criss’ plans to, at a minimum, address the budget in House Finance. That should provide a clearer signal on whether a personal income tax cut has a realistic path forward and to what degree the House may take the metaphorical sledgehammer to the Senate’s budget.
West Virginia faces real needs. Roads, special education funding, and child welfare among others — none of which currently see comprehensive game-changing increases in this proposal. Lawmakers must weigh whether residents prefer improved services now – with potential personal income tax cuts later through the already-enacted trigger mechanism – over an additional 10 percent cut today.
That’s the decision – the reckoning among their own ranks – lawmakers face.