State of West Virginia’s Budget Forecast

West Virginia Higher Education Board of Governor’s Summit

August 1, 2014

State Budget Office

1

2

The West Virginia Fiscal Picture

Little or No Revenue Growth in FY 2014 or FY 2015

Coal Mining production in decline; Gas is picking up slack

Foreign Exports key

Baby Boomers becoming senior citizens

Teacher Retirement System: Only 19 More Years Funding with 10%+ of Total General Revenue

Workers’ Compensation Solvent by CY2016?

3

National Fiscal Concerns

Federal funds make-up 1/3 of WV’s State Government Budget

Federal Health Care & Medicaid – effect on economy?

Future perpetual Federal budget deficits are still predicted

Medicare, Medicaid & Social Security make up almost 2/3 of Federal spending

Federal Government's accumulated debt continues to grow - $17.6 TRILLION

(debt per citizen > $55,000, debt per taxpayer > $151,000)

US GDP as of July 2014 = $17.3 Trillion

4

210,895,129

899,709,097

100,000,000200,000,000300,000,000400,000,000500,000,000600,000,000700,000,000800,000,000900,000,000

1,000,000,000

MCF

5

130,237,890

141,385,489

113,825,776

100,000,000105,000,000110,000,000115,000,000120,000,000125,000,000130,000,000135,000,000140,000,000145,000,000150,000,000

2009

0820

0911

2010

0220

1005

2010

0820

1011

2011

0220

1105

2011

0820

1111

2012

0220

1205

2012

0820

1211

2013

0220

1305

2013

0820

1311

2014

0220

1405

Tons

6

$3,605.2

$3,881.6

$2,000.0$2,200.0$2,400.0$2,600.0$2,800.0$3,000.0$3,200.0$3,400.0$3,600.0$3,800.0$4,000.0

$ M

illio

ns

Manufacturing Exports

7

$7,497.8

$4,027.4

$0.0

$1,000.0

$2,000.0

$3,000.0

$4,000.0

$5,000.0

$6,000.0

$7,000.0

$8,000.0Ja

n-07

Jun-

07

Nov

-07

Apr-

08

Sep-

08

Feb-

09

Jul-0

9

Dec-

09

May

-10

Oct

-10

Mar

-11

Aug-

11

Jan-

12

Jun-

12

Nov

-12

Apr-

13

Sep-

13

Feb-

14

$ M

illio

ns

Non-Manufacturing Exports

8

State of West VirginiaFY 2014Summary

General Revenue:Estimated Collections $4,136,001,000Actual Base Collections $4,036,104,603Shortfall -$99,896,397

One time revenues $70,000,000Mid-year budget cut $33,000,004

Actual Surplus from FY14 activity $3,103,607

Lottery Funds:Anticipated Surplus $30,000,000

Actual FY14 General Revenue collections only $2 million higher than FY13'sAdded $171 million of base state funding for MedicaidNo layoffs or furloughsGenerally agencies took a 7.5% ATB budget cutGood cash flow - paying bills on time100% of retirement contributions madeBond ratings still holdNo use of Rainy Day fund

9

State Of West VirginiaGeneral & Lottery Revenues

(in millions $)

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19General Actual Actual Actual Actual Actual Estimate Estimate Estimate Estimate Estimate

Personal Income Tax 1,447 1,593 1,689 1,746 1,664 1,810 1,908 2,061 2,165 2,263Sales / Use Tax 1,096 1,148 1,216 1,193 1,173 1,254 1,279 1,313 1,367 1,420Corporate Net Income 233 303 188 238 204 202 173 171 182 188Severance Tax 400 441 468 410 489 475 531 549 537 512All Others 582 579 542 517 576 513 504 550 550 552

total 3,758 4,064 4,103 4,104 4,106 4,254 4,395 4,644 4,801 4,935% change 8.1% 1.0% 0.0% 0.0% 3.6% 3.3% 5.7% 3.4% 2.8%

LotteryRacetrack Video 275 258 274 226 174 156 153 153 153 153Limited Video 199 199 265 200 188 191 191 191 191 191Traditional Games 40 36 46 47 31 36 36 36 36 36Table Games 17 32 38 36 32 22 22 22 22 22

total 531 525 623 509 425 405 402 402 402 402% change -1.1% 18.7% -18.3% -16.5% -4.7% -0.7% 0.0% 0.0% 0.0%

Note that FY14 Lottery numbers are estimated

10

2008

2009

2010

2011

2012

2013

2014

$220 $230 $240 $250 $260 $270 $280 $290 $300

WV State Funding Per Capita

2008

2009

2010

2011

2012

2013

2014

-

5

10

15

20

25

30

Rank (#1 = Highest)

WV

Ran

kin

g O

ut

of

50

11

2008

2009

2010

2011

2012

2013

2014

$7.20

$7.60

$8.00

$8.40

$8.80

WV State Funding Per $1,000 of

Personal Income

2008

2009

2010

2011

2012

2013

2014

- 2 4 6 8

10 12 14 16 18

Rank (#1 = Highest)

WV

Ran

kin

g O

ut

of

50

12

State of West Virginia

General & Lottery Appropriations

% of % of

Department FY 2009 total FY 2015 total

Public Education $ 1,918,411,298 44.24% $ 2,070,210,565 44.94%

Health & Human Resources 862,091,049 19.88% 1,038,529,728 22.55%

Higher Education 483,015,423 11.14% 475,060,375 10.31%

All Others 1,073,107,891 24.75% 1,022,589,390 22.20%

Total $ 4,336,625,661 $ 4,606,390,058

13

State of West VirginiaFY 2015Summary

General Revenue:Estimated Collections $4,253,951,000(3.6% higher than FY14)

Lottery Funds:Increased bond coverageRevenues remain flat

Required $80 million of base state funding for MedicaidMedicaid funding currently short $76 millionNo layoffs or furloughsGenerally agencies took a 7.5% ATB budget cut (Higher Ed 3.75%)Good cash flow predicted100% of retirement contributions madeBond ratings still hold$100 million usage of Rainy Day fund

14

1997 1998 1999 2000 2001 2002 2003 2004 2005 2%

2006 2007 2008 2009 12%

2010 2011 2012 2013 2014 22.8%

2015 est

20.1%

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

Rainy Day Balance at End of Fiscal Year

15

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3.500

3.700

3.900

4.100

4.300

4.500

4.700

4.900

5.100

5.300

5.500

3.500

3.700

3.900

4.100

4.300

4.500

4.700

4.900

5.100

5.300

5.500

General & Lottery Funds

Base RevenuesBase Expenditures

Fiscal Year (FY07-FY14 actual)

(FY15-FY19 estimated)

Billion $

16

Six Year Financial PlanThrough FY 2019

General & Lottery Revenues(In Thousands $) (as of 8/1/2014)

Preliminary DRAFT - Subject to Change-

Current Baseline Actual Actual Enacted Projected Projected Projected Projected2013 2014 2015 2016 2017 2018 2019

Estimated RevenueGeneral & Lottery Revenue $4,484,434 $4,337,009 $4,621,245 $4,666,079 $4,920,998 $5,083,858 $5,237,228One time revenues 171,619 307,288 2,300Total Available $4,656,053 $4,644,297 $4,623,545 $4,666,079 $4,920,998 $5,083,858 $5,237,228

Estimated ExpendituresBase Budget $4,520,291 $4,661,121 $4,814,860 $4,979,730 $5,143,438 $5,267,038

Expenditure Growth:Medicaid 426,063 170,725 79,966 35,740 49,355 56,524 46,911Public Education 1,876,166 4,404 (14,641) 2,262 2,323 2,502 2,700Higher Education 512,952 (30,522) (7,370) 500 (3,000) 0 0All Other 1,705,110 (3,777) 95,784 126,368 115,030 64,574 103,950

Total Ongoing Base Budget $4,520,291 $4,661,121 $4,814,860 $4,979,730 $5,143,438 $5,267,038 $5,420,599

One Time Expenditures & Adjustments 135,516 (46,281) (132,656) 6,349 4,560 4,820 4,629

Estimated Balance (Gaps) $246 $29,457 ($58,659) ($320,000) ($227,000) ($188,000) ($188,000)

Note: This six-year financial plan is a tool for analyzing future budgets and any gaps must be balanced.