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Report: W.Va. handling recession well

Sep. 14, 2009 @ 12:00 AM

CHARLESTON -- A new report ranks West Virginia among just a handful of states managing the fiscal stress brought on by what some have dubbed the Great Recession.

Well before the economic downturn, the nonpartisan Federal Funds Information for States began issuing annual assessments based on how states were handling their revenues, spending and budgetary reserves.

West Virginia stands with Louisiana, Montana and Wyoming among states "holding up" to the ongoing fiscal stress, last week's report said.

Only two states, North Dakota and Oklahoma, scored higher in the group's analysis, largely because they proved able to increase their reserves after their budget years ended in June.

Among West Virginia's neighbors, Maryland and Virginia were among 10 states deemed to have a long, hard road until they reach fiscal stability. The remaining 21 states -- including Kentucky, Ohio and Pennsylvania -- have not yet hit bottom.

The Mountain State has not always fared well in the fiscal stress ratings, and was listed as borderline as recently as the 2005-2006 year. But it has since kept its improved score while others have slipped.

Nearly three-fourths of the states made the preferable top two grading categories during the 2007 budget year. But those ranks slimmed to 22 in 2008 before West Virginia was left among the vaunted half-dozen this time around.

The group drew the figures for its latest rankings from the National Association of State Budget Officers, which had surveyed officials from each state on their finances.

That survey counted West Virginia among just eight states that did not have to cut their spending during the 2008-2009 budget year after it had begun. The Mountain State also earned points for ending the budget year with reserves that totaled at least 5 percent of its general revenue spending.

West Virginia is among a dozen states, including neighboring Virginia, that have 10 percent of revenues or budgeted spending as the target for their reserves, according to the National Conference of State Legislatures.

But West Virginia also sported a 19.8 percent drop in reserve balances between that fiscal year and the previous one, topped only by Alaska and its 51.7 percent decline. The report adds that both those states still boasted strong reserves, and were among 40 states saw at least some drop during that time period.

"Most declines are modest, reflecting a decision to use a portion of accumulated balances today, but to leave some for tomorrow," the report observed.

The Manchin administration adopted a hands-off approach toward tapping its "rainy day" funds for this year's budget, mindful of growing deficit threats projected for the next several years. But the lion's share of the reserves, handled by the state Investment Management Board, lost as much as one-fourth of its value in the months following Wall Street's meltdown.

By Aug. 1, that invested portion of the reserves had recovered to within 5 percent of where it had stood at the June 2008 beginning of that budget year, the latest board figures show.

Last week's report also notes that the economic downturn had prompted state governors to recommend tax increases totaling $23.9 billion. That would be more than twice the level of the biggest state revenue changes seen so far this decade, of just less than $10 billion in 2004.

When combined with drops in state spending proposed for the current budget year that exceed 2 percent nationwide, "these state responses to the current recession point to an historic fiscal event, and not in a good way," the report said.

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