By: Kathleen Stoll
January 18, 2022
On the table in the Legislature — and moving quickly — are proposals to make significant cuts to the revenue available to West Virginia to pay for critical, even life-saving state services. Alarm bells should be going off for any West Virginian who likes their Medicaid or Public Employee Insurance Agency health plan. The tax cuts now under discussion by the Legislature are a threat to those who rely on these programs to get the health care they need.
Further, the revenue reduction will limit our state’s ability to improve our foster care system.
Gov. Jim Justice has proposed changes to the personal income tax that would reduce total state revenue by a whooping one-fourth to one-fifth. But does this huge reduction in funds make policy sense? What is the price to be paid for such a large drain of the state budget pool?
The justification in Charleston for a large revenue cut is the so-called state budget “surplus.” This is a term accountants and economists can and do manipulate to show what they want. In this case, the increase in surplus revenue in the budget is a house of cards that won’t stand the test of time.
First, about half of the touted increase in state revenue is due to a temporary increase in natural resource severance taxes that are tied to very volatile and unpredictable energy prices. Our nation and West Virginia have no real control over those prices and that revenue source.
Second, our state has operated for several years under “flat” budgets that ignore the needs of vital programs and services. A flat budget ignores medical and other inflation and has resulted in understaffing at key agencies. And once again, the governor’s proposed budget is basically flat. The few areas that see funding increases do not even keep up with inflation.
Third, our current budget reflects an influx of significant federal COVID funding — one-time money that won’t be replaced.
The proposals to reduce state revenue are like spending all your paycheck on the first of the month and ignoring any future higher expenses or any risk of a smaller paycheck next month.
Turning to Medicaid and PEIA, medical costs are expected to increase by 7%, and prescription drug costs are expected to increase by 14%, just in this fiscal year.
If West Virginia does not have the revenue to keep up with yearly medical inflation, Medicaid and PEIA will end up on the chopping block. Just to keep up with medical inflation, either the government must increase funding for these programs or raise premiums, raise out-of-pocket costs, and cut benefits. One-time fixes won’t save these programs.
Our budget must include permanent increases for these programs, and make sure that “trust funds” or “reserves” for future increased costs are not robbed today to leave us in trouble tomorrow.
Consider these facts about the two largest health insurance programs in our state:
- Medicaid provides quality, affordable health insurance coverage for more than 600,000 West Virginians.
- Every hospital in West Virginia depends on Medicaid to keep its doors open.
- Medicaid faces a $157 million shortfall by fiscal year 2027.
- Medicaid is a great deal for West Virginia: Every $10 that West Virginia spends on Medicaid pulls in almost $30 federal dollars. Maximizing the federal matching money through Medicaid is the smart way to pay for health services for West Virginians.
- Medicaid federal money pulled into the state generates jobs and business activity. Cuts to state spending on Medicaid will harm the people who rely on the program and hurt our economy.
- More than 200,000 West Virginians — state and local employees and retirees — rely on PEIA. Right now, PEIA projects a budget shortfall of $376 million by fiscal year 2027. To fill this shortfall by raising premiums, by 2027, premiums would go up by 54%.
- Wheeling Hospital, part of West Virginia University Medicine, stated that, if PEIA payment rates are not raised, the hospital will stop accepting PEIA patients on July 1. And over time, to keep up with medical inflation, West Virginia hospitals will need more than a one-time increase, or more doors will close to PEIA patients.
In light of these facts, and with all due respect to our state leadership, I have to question whether West Virginia can truly afford significant tax cuts and the resulting revenue reductions.
In addition to the potential significant negative impact on Medicaid and PEIA, the health and well-being of working families and children are further threatened. My own state senator, Charles Trump, R-Morgan, has done a great job highlighting the need to address the shortages of Child Protective Services case workers. Here in Morgan County, we have no case worker, and neighboring Berkeley County has only one. Trump acknowledges the need to increase salaries to keep good workers on board and to help our state competitively recruit new workers. And we need more case worker slots so that caseloads are manageable. Will we have the long-term revenue to make these investments?
I hope the glitter and shine of a tax cut does not blind our Legislature. I urge its members to proceed with caution, eyes wide-open, and to not tie their own hands with a large reduction in revenue. Instead, the legislative process first must look carefully at state needs and essential investments to keep West Virginians healthy and our kids safe.
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