Population (July 2003): 1.8 Million
Total State Expenditures - SFY 2002: $8,150 Million (US Total: $1,073,816 Million)
TANF Expenditures - SFY 2002 (% of total): 2.5 % (US: 1.3%)
Medicaid Expenditures - SFY 2002 (% of total): 19.8 % (US: 20.8%)
(Source: U.S. Department of Commerce, Census Bureau and NASBO 2002 State Expenditure Report)
West Virginia's per capita personal income has been one of the lowest in the nation for the past twenty years. West Virginia did not benefit as much as other states from the economic boom of the late 1990s probably because its personal income tax is not as heavily dependent on the stock market. The recent projected state budget deficits for SFYs 2004 and 2005 have forced state officials to make difficult cuts.
West Virginia is also a high need state by most standards. The state's poverty rate has been one of the highest in the nation since 1995. Unemployment in West Virginia has also been consistently higher than the national rate, although it has decreased from 6.6 percent in 1998 to 4.8 percent in 2001, and again increased to 6.1 percent in 2003. West Virginia's labor force participation rate is especially low, ranging from 50 to 55 percent since 1995, compared to 63 to 65 percent for the nation. This may reflect large number of unemployed individuals who have stopped looking for work, as well as an aging population.
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State Budget Development and Implementation
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West Virginia's executive budgeting model provides the governor and executive agencies with much authority in budget development and implementation. Significant gubernatorial authority includes sole responsibility for establishing revenue estimates, line item veto, and the ability to extend the legislature's regular session if they do not enact a state budget before the new state fiscal year. The state's budget process begins with the governor's central budgeting agency releasing guidelines for agency budget requests for the upcoming fiscal year. These guidelines have included cuts of three to ten percent across agencies due to recent declines in state revenue. The governor's budget proposal is a compilation of agency budget requests developed to meet the executive's goals.
The legislature's authority in the budget process is limited by legal prohibitions to changing the governor's revenue projections and creating a deficit. The legislature's changes to the executive budget proposal must be cost neutral - an increase in funding in one area must be accompanied by an equivalent cut in another area. Limited staff to examine the governor's budget proposal and track agency administration of programs also restricts the legislature's influence.
The Department of Health and Human Resources administers a range of public welfare programs including TANF, child care, child welfare, adoption, and foster care. In West Virginia Medicaid and SCHIP are administered by two different agencies: Medicaid is administered by the Bureau of Medical Services within the Department of Health and Human Resources, whereas SCHIP is administered by the Children's Health Insurance Agency within the Department of Administration.
Two factors have converged to provide the Department of Health and Human Resources influence and autonomy in developing and implementing the state's social welfare budget. First, the governor's executive budgeting agency and legislature have limited staff to oversee the Department and must rely heavily on the expertise of Department staff during all phases of the budget process. Second, the state's budget typically appropriates funds at a broad level rather than itemizing funding in detailed appropriations, which are legal mandates restricting flexibility in budget implementation. This approach gave the Department significant authority to allow a large surplus of TANF funds to accumulate when caseloads plummeted in the late 1990s and to allocate the state's surplus TANF funds to programs and services when West Virginia started to spend down these dollars.
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West Virginia's Response to Federal Welfare Reform(3)
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West Virginia's response to federal welfare reform encompassed three phases. In the first phase, West Virginia officials designed the state's early TANF program to reduce caseloads to minimize financial risks associated with the new block grant structure of TANF and federal penalties for not meeting federal work participation rates. The state experienced a dramatic 71 percent decline in caseload from 1995 to 1999, compared to 45 percent for the nation. Specific policies that contributed to this decline included 1) more restrictive income eligibility guidelines (reducing the state's monthly eligibility threshold from $498 to $420 a month and counting SSI as income - the SSI requirement was later overturned by court and legislative action), 2) changes in administrative procedures requiring AFDC recipients to re-certify eligibility in early 1998 and instituting a more complicated application process, and 3) clear "work first" signals including a full-family sanction for non-compliance with work requirements.
Like most states, West Virginia amassed a surplus of federal TANF funds due to the block grant structure of the program and caseload decline. By the spring of 2000, the state's $160 million TANF surplus exceeded its $110 million annual federal block grant. This surplus of federal funds coupled with the flexibility in the final TANF regulations, provided incentive for the state to expand its TANF program, the second phase. Significant changes to West Virginia's TANF program during this period included: 1) an increase in income disregard rates from 40 to 60 percent, 2) a gradual, $200 increase in monthly cash assistance payments, 3) more generous diversion payment of up to four months of cash assistance payments, and 4) new supportive services to TANF recipients and others at risk of TANF recipiency. In addition to efforts to expand eligibility and services, West Virginia sought ways to use its federal TANF funds to support TANF-eligible services in its foster care and child protective services programs that had been funded with state funds. The state's TANF caseload began to increase during this period, earlier than in most states, yet it remained approximately half the 1995 pre-TANF level of 39,231 cases.
The third phase of West Virginia's TANF program was marked by budget deficits and the need to limit program expansion. In early 2001, the West Virginia Department of Health and Human Resources announced a projected $90 million deficit in the state's TANF program for federal fiscal year 2003. This announcement and subsequent efforts to restrain spending attracted media attention.
The state used an open process to tackle the projected deficit which included a TANF advisory council of non-profit stakeholders, advocates, and state officials appointed by Governor Bob Wise to recommend a cost reduction plan. The Council recommended a series of cuts to TANF funded benefits and services, giving priority to fund those services that were more closely aligned with goals one and two of the federal TANF program - to assist needy families and promote employment. Changes recommended by the Council that have been enacted include reducing the state's 1) earned income disregard rate from 60 to 40 percent, its previous level, 2) child support pass-through from $50 to $25 a month, and 3) eligibility for services to individuals not in receipt of TANF from 185 to 150 percent of federal poverty level. The following recommendations have met resistance from stakeholders and have either been taken off the table or scaled back 1) use non-TANF funds to support $43 million in foster care and other services provided by the Bureau of Social Services - these services were previously funded by a TANF transfer 2) discontinue $27 million in contracts with mostly community-based organizations for supportive services, 3) reduce eligibility for child care services, and 4) eliminate the state's marriage incentive of $100 a month.
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Other Federal Social Welfare Programs
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West Virginia spends more on its Medicaid program than any other single area of the state budget except for elementary and secondary education. Several state officials characterized the Medicaid program as an integral part of the West Virginia's health care system. It funds approximately 55 percent of the state's births. West Virginia's Medicaid program has been plagued with budget shortfalls. In general, the governor and legislature have been hesitant to cut coverage preferring instead to rely periodically on state funds set aside for changes in federal programs, funds from the state's tobacco tax, and attempts to control utilization. West Virginia has a Health Care Provider Tax that dates back to 1993. This tax continues to be a source of contention between the state and the various health care providers that are taxed.
The start-up and administration of West Virginia's SCHIP has been a source of contention. The state was slow to ramp up its SCHIP program due to problems inherent to starting a new program and fear that SCHIP would expand the state's already costly Medicaid program. From July 1998 to October 2000, West Virginia expanded its program to cover all children in households with income from 150 to 200 percent of the federal poverty level. SCHIP became a high profile item when Governor Bob Wise campaigned on a platform that included improving the program's enrollment. West Virginia's SCHIP program was one of only a few spared from the executive's directive to cut SFY 2005 state agency funding requests by 9 percent.
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