Published: October 02, 2008 12:08 am            

Leaders upbeat about state’s finances

CHARLESTON — West Virginians worried about their state’s finances should consider its robust “rainy day” fund, healthy revenue collections and sizable pool of cash on hand.

That’s the message from Gov. Joe Manchin and other state leaders, who offered assurances Wednesday that West Virginia can withstand the financial storm now rocking Wall Street.

“West Virginia is in the best position at this time than it’s ever been in,” Manchin told reporters and others at a news conference.

But the governor cautioned that the state will not likely emerge without some losses, nor will residents who have 401(k) plans and other stock investments. “We will not go unscathed,” he said.

Manchin also called it premature to consider targeted tax breaks for energy producers or on motor fuels. But he did not rule out revisiting interest rates for state loan programs or providing credit to key employers if necessary.

Signs of the state’s fiscal health include an emergency reserve fund that equals 14.7 percent of its $3.9 billion general revenue budget, according to June figures from the National Association of State Budget Officers. The group ranks West Virginia third for the relative size of its rainy day reserves.

The state also ended the first three months of its budget year Tuesday with $90 million more that expected from general revenue taxes. That surplus equals about 10 percent of collections. Continuing demand for coal and natural gas, and the resulting boost to business and individual incomes, help account for the strong showing, while declining sales tax revenues reflect consumer fears.

“A number of states, surrounding states and other states in the country, are way below their projections,” Revenue Secretary Virgil Helton said.

At least 15 states have seen budget shortfalls emerge within the last two months that threaten their current spending, according to the Center for Budget and Policy Priorities. They are among 29 states that had already raided reserves, cut spending or increased taxes to craft their budgets this year, the center reports.

Avoiding that trend, West Virginia is also insulated from the hit that such states as New York, New Jersey, Connecticut and Massachusetts expect to take because their economies rely more heavily on the financial services sector.

West Virginia also ranked 20th in the latest quarterly Index of State Economic Momentum, its best showing in at least five years. Compiled by State Policy Reports, the rankings are based on unemployment rates and growth in employment, population and income growth in each state.

Not so rosy for the state are its investment losses. With nearly $11 billion in invested assets as of August 31, the latest date for figures, the value of the state’s portfolio dropped $27 million that month and by $643 million during the preceding budget year.

But the state’s five-year returns remain above their 7.5 percent target, and officials again stressed a long-term strategy that relies on holdings in a wide array of options beyond corporate stocks.

“The Investment Management Board will weather this storm as well or better than our peers,” Executive Director Craig Slaughter said. “We are in the midst of a financial storm, but in the investment business, we expect financial storms.”

A separate state investment fund that focuses on short-term holdings has fared far better. The $3.5 billion overseen by Board of Treasury Investments gained nearly $307 million between August, the latest month for figures, and August 2007.

“We’re very secure, very safe,” state Treasurer John Perdue said.

That fund provides on-hand cash to both state and local governments. Auditor Glen Gainer said the $180 million it contains for paying the day-to-day bills of state government reflects “a very strong position this early into the fiscal year.”

Gainer noted that the percentage of pending bills that are 45 or more days old are at the lowest level in his 16 years holding that office.

Other areas cited at Wednesday’s conference included a “stable” industry of state-chartered banks, the nation’s seventh-lowest unemployment rate and a Housing Development Fund that remains able to help low and moderate-income residents buy homes.

Fund Executive Director Joe Hatfield said money market holdings continue to provide funds, though a roiling bond market has cut off that source. He also said that of 20,000 active Fund loans, just 17 have been threatened by foreclosure. Of those, nine avoided that fate by renegotiating their terms.

        

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