The Senate Finance Committee heard a report from Deputy Revenue Secretary Mark Muchow regarding the expectations for state revenue growth for the coming year, as well as how West Virginia’s fiscal growth compares to surrounding states and the national average.
Overall, revenue growth is expected to slow. One contributing factor is that major pipeline investments have been temporarily put on hold. However, counties and schools are benefiting from the pipeline property tax.
The forecast also included a downward shift in tax revenue on tobacco products, largely due to the federal decision to increase the legal age of purchasing tobacco products to 21.
Lower natural gas prices are expected, and natural gas and energy productions are expected to increase more slowly.
Expectations for areas of job growth are expected to shift as well. Currently, construction and health care sectors are the leading job growth areas. Retail trade is expected to decline, but employment opportunities in e-commerce are expected to rise.
In addition, Administration officials began fleshing out some of the initiatives Gov. Jim Justice set forth in his Wednesday night state-of-the-state speech.
Tax and Revenue Secretary David Hardy explained to the Senate Finance Committee that Medicaid has a $309 million state-dollar surplus because of declining enrollment, pharmacy savings and an increase in the federal match rate. The state currently spends about $900 million in state dollars for Medicaid. The federal match brings the program to about $3.5 billion—one of the largest items in the budget.
Hardy said the proposed fund, to be known as the Medicaid Families First Reserve Fund, would be similar to the state’s Rainy Day funds and a fund established last year for the Public Employees Insurance Agency to keep down premiums. With the permission of the legislature, the administration would be able to access the fund when Medicaid’s financial condition warrants it.
Democrats grilled Hardy about why the administration is choosing to park the money and not using it to draw down federal funds, now at an all-time-high match rate. Sen. Ron Stollings, a Boone County physician, said the money could be better used to increase provider reimbursement. He cited rural hospitals and oral health programs as examples of providers who would benefit from enhanced reimbursement.
(For the geek among you—Nobody can successfully explain how the Centers for Medicare and Medicaid Services determine the match rate. It is determined by a state’s economy and how it relates to other states and is generally done retroactively. If the state’s economy is recovering—as the governor claimed in Wednesday’s speech—the match rate will decrease in upcoming years, bringing less federal money to the state.)
Justice promised to eliminate the waitlist for the state’s IDD waiver, which provides Medicaid funding for the care of individuals with severe intellectual or physical disabilities. West Virginia has, for the past several years, been successful in ratcheting back the cost of this extremely expensive program by bringing services in line with those offered by surrounding states. Hardy said it will take $19.7 million to move the 1,060 individuals on the waitlist into the IDD program.
[Situational awareness: If all individuals are successfully moved from the waitlist, a new waitlist will be started as new clients become eligible for services.]
Hardy said the budget includes $25 million for improvements to the child protective services program. Justice said during his speech that 87 more workers will be hired. The state currently has about 7,000 children in foster care and an agreement with the Department of Justice to improve the program.