West Virginia: Tools for Sustainable State Budgeting

Fact Sheet November 15, 2023 Read time:

Projects: State Fiscal Health

The Pew Charitable Trusts’ 2023 report “Tools for Sustainable State Budgeting” examines whether and how states are using long-term budget assessments and budget stress tests to measure and strengthen their fiscal outlooks.¹ This is one of 20 fact sheets describing the approaches of and opportunities to improve for each state that produces at least one of these analyses.²

Long-term budget assessment:	Budget stress test:
Report: “Six Year Financial Plan” and “Long-Range Issues,” in “Executive Budget: Volume I, Budget Report, Fiscal Year 2021”³
Office: State Budget Office

Analyses

Through fiscal year 2021, each edition of the governor’s annual budget proposal included a “Six Year Financial Plan,” with revenue and spending projections for the remainder of the current year and five additional years.⁴ By comparing expected revenue to ongoing spending, the six-year plan projected whether the state would have a surplus or shortfall each year. The fiscal 2021 edition, published in January 2020, showed annual deficits greater than $150 million from fiscal 2022 to fiscal 2025, the final year of the forecast.⁵

In the executive budget proposal, the “Long-Range Issues” section followed the six-year plan and described West Virginia’s fiscal risks, while also mixing in discussion of various economic, demographic, and service-delivery challenges.⁶ For example, a subsection on health care listed fiscal risks to the state Medicaid program such as “unfunded mandates” from the federal government and judiciary, “inflationary health care costs,” and “pandemic flu.”⁷ It also discussed West Virginia’s wellness statistics, including rates of poor physical and mental health well above the national average.⁸

The three editions of the governor’s budget report released since fiscal 2021 have not included the six-year plan but have featured the “Long-Range Issues” section.⁹

Policy impact

Legislators, journalists, and researchers have mourned the loss of the six-year plan, which they considered a valuable tool for assessing long-term fiscal health.¹⁰ When lawmakers considered major tax cuts in 2023, legislators noted that the lack of long-term projections made it harder to judge whether the cuts would be affordable in the future.¹¹

Next steps

West Virginia could restart the six-year plan using ranges for revenue and spending to show the spectrum of plausible outcomes, reducing the need for specific estimates. This approach would also be a first step for the state to begin conducting budget stress tests: The pessimistic portions of the ranges could show how the state would fare in a recession.

West Virginia could also consider identifying a new agency, such as a legislative office, to produce the long-term assessments if the State Budget Office does not want this role.