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Report says WV’s reserve funds among US leaders

CHARLESTON, W.Va. — West Virginia is one of six states that have enough reserve funds to cover more than 100 days of general operating expenses, according to a new report on states’ financial health.

Released Tuesday, the Fiscal 50 report, published by the Pew Charitable Trusts, found that most states currently have smaller reserve funds — informally known as “Rainy Day” funds — than they had in 2007, prior to the national economic recession.

In fiscal 2006-07, states had enough in reserve funds to run general government operations for a median of 41.3 days, but that number had shrunk to 31.06 days in fiscal 2014-15, the most current year for which data is available from the National Association of State Budget Officers.

Gov. Earl Ray Tomblin, who was instrumental in establishing the state’s Rainy Day fund while serving as Senate Finance chairman in 1994, said the report shows the importance of maintaining a strong reserve fund.

“We have one of the strongest Rainy Day funds in the nation, something that has been badly needed in the aftermath of this summer’s historic flooding,” the governor said Tuesday. “Looking ahead, we need to continue moving away from using one-time monies to fill budget gaps and toward a budget that puts us on a strong footing for the long-term.”

During the 2016 regular session and subsequent 17-day special session, Tomblin criticized attempts by legislative leaders to raid the Rainy Day funds to close revenue shortfalls in the 2016-17 budget.

He vetoed a proposed budget bill that would have taken $182 million in Rainy Day funds, before ultimately approving a 2016-17 budget bill that uses $70 million in reserve funds to close the gap.

Earlier this month, the Legislature approved an $85 million appropriations bill to cover the state’s share of recovery costs from the June 23 floods, legislation that takes an additional $55 million from the Rainy Day funds.

West Virginia, according to the report, had enough reserve funds in fiscal 2014-15 to operate state government for 111.1 days, ranked sixth behind Alaska, North Dakota, Wyoming, Nebraska and Texas.

 Conversely, the report found three states — Arkansas, Pennsylvania and Kansas — lacked sufficient reserves to cover one week’s worth of government operations, and projected that Illinois, Virginia and Wisconsin would fall below one week’s worth of reserves in fiscal 2016.

Kansas, the report notes, had its bond ratings downgraded in 2016 after raids on its Rainy Day fund to offset lost revenue from massive business tax cuts.

“States braced for the biggest declines were Alaska and North Dakota, where falling oil prices led each to withdraw substantial amounts from their Rainy Day funds in fiscal 2016 to make up for tax revenue shortfalls,” the report notes.

Likewise, a downturn in the West Virginia economy, driven by plunging oil and natural gas prices and a decline in coal production, has resulted in drawing down the state’s Rainy Day funds from $956 million on June 30, 2014, to about $747 million now.

“The unprecedented shift in our state’s economy requires us to look around the corner to new opportunities for job creation and economic diversification,” Tomblin said.

“While we work to grow our economy and create new revenue, we also must continue being responsible and wise with our state budget,” he added.

The Pew report concludes that states with a history of economic volatility tend to require larger financial cushions than states with more diverse economies.

“Building up resources and balances is a sign of fiscal recovery, but there is no one-size-fits-all rule on when, how, and how much to save,” the report concludes.

Reach Phil Kabler at [email protected], 304-348-1220, or follow @PhilKabler on Twitter.

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