West Virginia Using Budget Surplus to Fill Medicaid Funding Gap

The state finished the budget year June 30 with a $101.9 million surplus.
by | September 13, 2012

West Virginia's general revenue fund generated just enough surplus revenue to plug a $65 million Medicaid hole in this year's state budget, the director of the State Budget Office said Wednesday.

Mike McKown gave lawmakers the final report on the state's 2012 fiscal year budget during committee meetings at the state Capitol Wednesday afternoon.

McKown said the state finished the budget year June 30 with a $101.9 million surplus.

"This didn't happen by accident," he said. "We tried to budget conservatively. We tried to look down the road, not just how things affect current year, but in the out years of our six-year plan."

While $101.9 million may sound like a large sum, much of it is already earmarked.

"We've already appropriated most of the surplus from FY12," McKown said.

For starters, state law requires up to half of any surplus to be placed in the state's Rainy Day reserve fund until that fund builds to about 13 percent of the state's general revenue fund budget for any given year.

That transfer took about $28.2 million of the surplus, leaving about $73.8 million.

Lawmakers had been hoping for a surplus of at least $67.5 million to fill holes in the budget for the fiscal year that started July 1. About $65 million will be applied to shortfalls in Medicaid, the state's health care program for the poor.

Those two items whittle the $101.9 million surplus to just under $6.4 million.

"That's a fairly small amount," McKown told lawmakers. "Not much general revenue to work with there."

The general revenue fund supports most of the state's day-to-day operations. About half of the money is used to fund public schools across the state, 20 percent goes to the Department of Health and Human Resources and another 11 percent goes to higher education. Other state funds also ended the year with surpluses.

The State Road Fund ended the year with a $43.1 million surplus, driven by an 8 percent increase in automobile sales tax collections. While auto sales were up, state fuel tax collections were off about 3 percent, or $10.7 million, as compared to last year.

While consumers are buying more cars, officials worry that the higher fuel economy of those cars will eat into gas tax revenues in coming years.

The state Lottery ended the year with an $81.6 million surplus. McKown said that fund was aided by opening delays for several out-of-state casinos that will be significant competitors to this state's racetrack casinos.

The Lottery surplus will be available for lawmakers to appropriate during the next legislative session.

Overall, McKown said West Virginia is faring better than other states.

"We have a strong and growing rainy day fund, we pay our bills on time, our cash flow is pretty strong, and we don't have to borrow money to pay our everyday bills," he said.

McKown said the situation may change over the next few years. "We certainly have some challenges looking at us in the upcoming year driven by Medicaid and the coal economy and what's happening there," he said.

He also said the uncertainty over the federal budget process -- whether Congress will allow several automatic spending cuts to kick in at the end of the year, or if they will negotiate a deal to cut spending in other ways -- makes it hard to predict how much money the state will have to chip in to keep some programs running.

McKown said he's been working with state agency leaders to begin the 2014 budget process. Most agencies have been asked to make 7.5 percent cuts to their proposed budgets so the state can continue funneling more money to the Medicaid program.

McKown said he believed those cuts would be enough for the governor to present a balanced budget to the Legislature next year.

(c)2012 the Charleston Daily Mail (Charleston, W.Va.)

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