Reporter’s notebook/A few thoughts on the end of the fiscal year
The Independence Day weekend and the week leading up to it is typically a boring time in state government. When it coincides with the end of the fiscal year, a year that had already seen lower-than-expected tax revenue have gasoline thrown on it by the coronavirus, it gets less boring.
I told a few friends that if Gov. Jim Justice could somehow end the fiscal year for the state in the black, that would certainly be a feather in their cap going into the general election in November. What was once a $500 million budget deficit by the end of the year by officials in April eventually shrank to a $255 million shortfall.
Move some money here, take some money there, insert other creative accounting gimmicks, use $57 million of the $1.25 billion C.A.R.E.S. Act funding for coronavirus expense reimbursement and — poof– we end the fiscal year at midnight on June 30 in the black.
Not so fast.
We actually ended the fiscal year $1.3 million less than the estimate, meaning we didn’t end the fiscal year with a balanced budget. What happened?
According to Department of Revenue Secretary Dave Hardy, the state was expecting a $500,000 surplus when the clock struck midnight on Tuesday. When they woke up, that same account showed a deficit of more than $800,000.
After the super sleuths at the Department of Revenue got out their calculators and magnifying glasses, it was discovered that $3.8 million in revenue that came into the income tax line item was offset, $1.3 million of that amount was income tax withholding due to state employees getting paid Thursday. That money instead was moved to fiscal year 2021 revenue for July instead of showing up in June.
I can see that being a mistake, but I still have a few questions. You mean to tell me that the Department of Revenue didn’t stop to consider that as a possibility? Also, did you all bother to talk to the staff at the State Auditor’s Office leading up to Tuesday? My sources tell me no. Staff at the State Auditor literally were handed the paperwork by the Governor’s Office Tuesday evening with four hours until midnight.
That’s like waiting to do your homework for a joint project with a classmate and handing your partner your work an hour until deadline. That never ends well.
Maybe we should return to having the Board of Public Works all involved with the budget. The state Constitution was amended in 1968 giving the governor sole authority over crafting the budget. The state Constitution also mandates the passage of a balanced budget and requires the state not contract a debt except to meet casual deficits. Of course, there’s no real penalty should this not happen.
So, is it a big deal or not? It certainly can be, particularly going into an election. Of all the jobs a governor has, one is to end the year on a balanced budget. At least twice in the last five years the state got close to starting a new fiscal year without a budget: in 2017 during Justice’s first year, and in 2016 during former governor Earl Ray Tomblin’s final year.
I know, because I got married at the Capitol in June the Saturday the House of Delegates and state Senate were wrapping up that budget. My ceremony was on the Senate side. The buzzer to call the House back into session went off in the middle of my wife’s vows.
Back to my point. The budget is the most important thing a governor has to do. If Kanawha County Commissioner Ben Salango isn’t preparing his TV ads and mailers hitting Justice for screwing up the fiscal year because of a dumb accounting issue, I’d be surprised.
Also expect Justice’s handling of the $1.25 billion C.A.R.E.S. Act to also grow into a political football for Salango and his supporters, such as U.S. Sen. Joe Manchin, to use.
Some of the concerns are legit, though most are being exaggerated through a political lens. The main line being used is that West Virginia is taking too long getting the money out. It’s true that there was a lag. The state didn’t get the $1.25 billion until mid-April. The first guidance from the U.S. Treasury Department didn’t come out until the end of April (and has been revised a few times since then), and the state didn’t get the application portal for county and municipal governments up until May 15.
According to the State Auditor’s Office, there were 18 applications for C.A.R.E.S. Act coronavirus expense reimbursements from local governments in May. The first awards or recommendations for rewards were approved May 27. There has been a total of 185 applications, and 106 approvals totaling $18.8 million.
You can argue it was slow going at first, but I think money is starting to move out at a healthy clip. Assuming the remaining 79 applications pending are approved, the total dollar amount being sent out would be $53.9 million — or 4.3 percent of the $1.25 billion. Keep in mind, that has to cover reimbursements between now and the end of December.
So, considering that only 26 counties and 62 municipalities (not counting a handful of ambulance authorities, sanitary and utility boards, and parks commissions) have requested C.A.R.E.S. Act reimbursements to date and we’ve barely made a dent in the $1.25 billion, how much faster should the state be pushing this money out?
As for the $100 million for “COVID-19 related highway projects,” you’ll have to wait for my thoughts on that for next week.
(Adams is the state government reporter for Ogden Newspapers. He can be contacted at firstname.lastname@example.org)