O U R F I S C A L C H A L L E N G E S E a r l y C h i l d h o o d C a r e & E d u c a ti o n i n W . V a .

WV Early Childhood Planning Task ForceSeptember 6– Committee Meeting. 11 a.m.-3 p.m.

TED BOETTNERExecutive Director

OVERVIEW

West Virginia’s Budget Outlook

Federal Budget & Sequester

Future WVCBP Analysis of Early Childhood Development Financing and Best Practices.

Questions

WEST VIRGINIA’S BASE BUDGET REVENUES (FY 14)

FY 2014

$4.1 Billion

$152 million $164 million $4.4 billion

Excess LotteryLotteryGeneral Revenue

WEST VIRGINIA’S BASE BUDGET (FY 14)$4.4 BILLION

Public Education47%

Higher Education11%

Military Afairs & Public Safety

8%

Judicial & Legislative3%

Senior Services1%

Other5%

Administration2%

Health & Human Resources

21%

Commerce2%

WEST VIRGINIA’S BASE REVENUE BUDGET (FY 14)

Personal Income39%

Sales & Use Tax27%

Severance Tax10%

Lottery Revenue8%

Other9%

B&O Tax2%

Corporate income & Business Franchise Tax

5%

GENERAL REVENUE FUND REVENUE GROWTH BELOW HISTORICAL AVERAGE (4.6%)

FY 1990

FY 1992

FY 1994

FY 1996

FY 1998

FY 2000

FY 2002

FY 2004

FY 2006

FY 2008

FY 2010

FY 2012

FY 2014

FY 2016

FY 2018

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

ProjectedActual Collec-tions

Average growth rate1990-2008

Expr

esse

d in

bill

ions

SIGNIFICANT BUDGET GAPS AHEAD ($ MILLIONS)

FY 2015 FY 2016 FY 2017 FY 2018

-$264,791

-$192,028

-$108,960-$82,276

MAJOR BUDGET GAP DRIVERS

Sluggish economic recovery Medicaid growth Revenue problem:

Reduction in Corporate Net Income and Business Franchise Tax: -$191 million

Food tax elimination: -$174 million Thin-seam coal tax credit has grown from $23.5 million in 2006 to

$75 million in 2011. Estate tax elimination: -$10-20 million per year. Declining lottery, B&O, and severance tax collection.

WEST VIRGINIA STILL SUFFERING FROM HIGH UNEMPLOYMENT

200020002001200220032004200520052006200720082009201020102011201220130.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

PERSONAL INCOME GROWTH HAS NOT CAUGHT UP

2005 2006 2007 2008 2009 2010 2011 2012 2013$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$64.1

Average Growth Rate 1990-2008 $71.9

WV

Pers

onal

Inco

me

(Bill

ions

$)

MEDICAID GROWING BY 7.6% ANNUALLY

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

$815.9$911.5 $953.1 $997.6

$1,070.4

In m

illio

n $

BUSINESS TAXES SHRINKING AS A SHARE OF WV GENERAL REVENUE FUNDS

FY 1990

FY 1992

FY 1994

FY 1996

FY 1998

FY 2000

FY 2002

FY 2004

FY 2006

FY 2008

FY 2010

FY 2012

FY 2014

FY 2016

FY 2018

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Corp

orat

e N

et In

com

e an

d Bu

sine

ss F

ranc

hise

Tax

Col

lecti

ons

(in

tho

usan

ds)

Shar

e of

W.V

a. G

ener

al R

even

ue F

unds

SALES TAX BASE IS SHRINKING PARTLY FROM FOOD TAX ELIMINATION

FY 1990

FY 1992

FY 1994

FY 1996

FY 1998

FY 2000

FY 2002

FY 2004

FY 2006

FY 2008

FY 2010

FY 2012

FY 2014

FY 2016

FY 2018

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

Personal Income Tax Consumer Sales and Use Tax

Growth of Major Sources of Revenue FY 2012 to FY 2018 (estimated)

Lottery Funds (-33%)

Business & Occupation Tax (-15%)

Severance Tax (-13%)

Tobacco Tax (-5%)

Corporate Income/Business Franchise Tax (-3%)

Sales & Use Tax (12%)

Personal Income Tax (33%)

-40% -30% -20% -10% 0% 10% 20% 30% 40%

WEST VIRGINIA’S RAINY DAY FUNDS

2008 2009 2010 2011 2012$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Bala

nce

in m

illiio

ns

As a

sha

re o

f gen

eral

reve

nue

2013 SEQUESTRATION BREAKDOWN

Defense Domestic Discretionary Medicare Other Mandatory

$42.7

$25.8

$11.3 $5.5

Billi

ons

Impact of Sequester Cuts on West Virginia

Job Losses: 982 jobs in defense and 9,065 in non-defense (Stephen Fuller @GMU).

$76 million in cuts in federal grant funding in FY 2013 relative to FY 2012 (EPI).

Cuts to ARC funding, child care, Head Start, job training, work study, special education, domestic violence, law enforcement, clean air and water, meals for seniors, vaccines, and army bases.

Between 2014 and 2021, sequestration will reduce federal spending by $109.3 billion per year.

Sequester Cuts on Head Start in WV

$3 million in Cuts: 400 children in West Virginia slated to lose Head Start and Early Head Start this year and 80 Head Start workers laid off.

Options: Use school-aid formula and Pre-4 program to pick up

some of the kids. Earmark funds to program like other states (MN). Stave off cutting by cutting other parts of the program.

WVCBP Analysis of Early Childhood Development Financing and Best Practices

Compare WV early childhood program spending with other states. Specially, Birth to Three, Home Visiting, Head Start, Child Care Assistance, and Pre-K.

In-depth analysis of WV’s fiscal position, including fiscal capacity.

Options for funding early childhood programs. Explore feasibility of social revenue bonds for

financing early childhood programs.

QUESTIONS?

Sources used in this presentation: U.S. Bureau of Labor Statistics and Bureau of Economic Analysis and W.V. Budget Office data.