Budget officials caution against tapping into rainy day fund - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Budget officials caution against tapping into rainy day fund

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West Virginia has one of the strongest rainy day funds in the country and many are asking what exactly that money is for.

At the Associated Press Legislative Lookahead Feb. 7, members of the press asked a panel of state budget experts questions they hear from sources all the time. Why can't that money be used to build new schools? Isn't the rising cost of Medicaid considered an emergency? Why can't the state use that money at its discretion?

Actually, that money could be used for any of those purposes, as long as the Legislature approves, said Mark Muchow, deputy cabinet secretary of the West Virginia Department of Revenue.

"The only purposes it's ever been used for is floods, snowstorms, those types of situations," he said.

The rainy day fund currently totals $914 million, or 22 percent of the state's budget, which really isn't a lot in the grand scheme of things.

"That gets you through about two-and-a-half months of expenditures. And it's one-time money," said House Finance Committee Chairman Delegate Harry Keith White, D-Mingo.

State officials haven't asked to dip into the fund for several years. The last time the money was used, it was reimbursed dollar for dollar.

"That's our savings account that's really only three months. It's an emergency fund," said Sen. Mike Hall, R-Putnam.

Having a strong rainy day fund also helps the state earn higher bond credit ratings. Currently, the state's bond rating is A1, according to Moody's. Muchow said the rating isn't higher because the state's economy is too narrowly based. He said 10 percent of the state's economy is based on exports, and that kind of uncertainty may cause the state to have to access the emergency money.

"Because of that volatility, we may have to dip into the rainy day fund to pay bills," he said. "That's why it's there."

Credit rating companies look at states and state agencies the same way they would look at an individual, said Sen. Mike Hall, R-Putnam. The state treasurer's office does a yearly debt capacity report that helps determine the bond rating.

"There are metrics that look at how much money you can borrow," Hall said. "There are West Virginians who own these bonds. If the credit rating on your bond goes down, your bond value goes down."

The state's budget for fiscal year 2014 does not show any growth in revenue. Thanks in part to rising Medicaid costs, Gov. Earl Ray Tomblin asked some state agencies to cut 7.5 percent of their budgets in order to balance the budget. State Budget Office Director Mike McKown said he would not consider the Medicaid problem to be a reason to dip into the rainy day fund.

"If you see us getting into rainy day to balance budgets, we're at our last resort," he said.