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West Virginia in economic well-being in a 2024 assessment of state trends in child welfare from a prominent national philanthropic foundation.

The assessment from the Baltimore-based Annie E. Casey Foundation, a longtime authoritative source on child poverty and welfare data, found West Virginia’s percentage of children in poverty rose from 20% in 2019 to 25% in 2022, even as it fell by one percentage point to 16%.

But 37 faces the task of addressing 47 with a third, much larger number looming: 400 million.

That’s how many dollars comprise the nine-digit shortfall Morrisey says is projected for the state’s budget for fiscal year 2026 after years of flat budgets — budgets that don’t increase — from previous Gov. and now U.S. Sen. Jim Justice, R-W.Va.

West Virginia’s 17.1% decrease in general fund expenditures from fiscal years 2024 to 2025 easily was the largest decline in the U.S. in that span, according to a National Association of State Budget Officers .

But despite years of flat budgets not keeping up with inflation and criticism the state has chronically underfunded state agencies while over-relying on tax cuts to seek economic growth, Morrisey has said he’s for more tax cuts.

“The reason I believe we need to have tax cuts overall is we have to do things that move the needle,� Morrisey said at a Jan. 28 news conference at which he pledged “there will be no new taxes in our budget.�

Morrisey ran on a platform that included shrinking the size of government and eliminating the state income tax, which taxes people with higher incomes at higher rates than people with lower incomes.

Morrisey signed the “Taxpayer Protection Pledge,� a written commitment per a project by anti-tax increase advocacy group Americans for Tax Reform to oppose any efforts to raise taxes.

Americans for Tax Reform president Grover Norquist, who told NPR in 2001 he wanted to reduce government to the size he could “drag it into the bathroom and drown it in the bathtub,� congratulated Morrisey on his gubernatorial race win in a November statement, citing Morrisey’s commitment to eliminating the state income tax.

Morrisey’s spokesperson did not make him available for an interview. Morrisey communications staff attended but did not take questions at the West Virginia Press Association’s annual Legislative Lookahead forum Friday at which state leaders previewed the 2025 legislative session at the Culture Center at the State Capitol Complex in Charleston.

“There’s a new sheriff in town,â€� Sam Workman, director of West Virginia University’s , said of Morrisey during a virtual 2025 legislative preview hosted by the West Virginia Rivers Coalition and the ³ÉÆ·ÈËÊÓƵ Sierra Student Coalition on Jan. 27. “Governor Morrisey, understanding his style of governance, I think it’s very much different than the previous four years.â€�

The difference under Morrisey, Workman said, will be a transition away from state support for private investment initiatives under Justice amid what had been a mass influx of budget-boosting federal dollars.

But advocates of strengthening West Virginia’s social safety net fear Morrisey is signaling he’s poised to shrink government in the wrong places.

Morrisey focused on PEIA, Medicaid, public education

Morrisey identified Medicaid and education as two of the biggest drivers of the projected $400 million budget deficit. He reported $153 million of it was a shortfall for the state’s share of Medicaid funding the state has been covering using “one-time money.�

The new governor’s office said over $100 million of the shortfall came from base increases tied to the state K-12 school aid and higher education formulas and costs linked to the Hope Scholarship, the state’s nonpublic school vouchers program that provides families public money to have their children leave the public school system.

Morrisey also attributed $62 million of the projected deficit to the state’s share of expenses stemming from the West Virginia Public Employees Insurance Agency.

“Just the fact that he’s named those a few times and said that they are drivers of the budget shortfall kind of makes my spidey senses tingle, or whatever that phrase is,� said Kelly Allen, executive director of the , a nonprofit policy research group.

That’s because the WVCBP contends the drivers of West Virginia’s budget hole have been on the revenue side, with tax cuts too deep and based on temporary financial conditions.

Workman predicted the $400 million deficit would trigger service cuts that impact “some mix of� health care, PEIA and public education.

Gary Zuckett, executive director of , a progressive advocacy organization, said Morrisey’s talk about “right-sizing� government is code for cutting what he called essential services: Medicaid, child care, schools and public safety.

“Watch out,� Zuckett said in an email, “here it comes!�

Revenue collection drop of $2B-plus projected

Morrisey takes over just under two years after Justice signed into law , which lowered the income tax in 2023 by an average of 21.25% and set up triggers to allow for future income tax rate cuts.

The Department of Revenue estimated a retroactive personal income tax rate reduction in the legislation would reduce General Revenue Fund collections by up to $114.6 million in fiscal year 2023, $695.6 million in fiscal year 2024, $609.5 million in FY 2025 and $634.4 million in FY 2026 — a total decrease of $2.05 billion. The decline in General Revenue Fund collections would keep increasing in subsequent fiscal years due to underlying tax base growth, the Department of Revenue predicted.

In 2015, West Virginia eliminated its business franchise tax, established in 1987 to levy tax on a business’ capital after a phaseout. The state in 2014 lowered its corporate income tax rate from 7% to 6.5%.

Meanwhile, state-budgeted appropriations for education rose only 0.07% from fiscal years 2015 to 2023, according to a Gazette-Mail analysis of budget data, lagging behind inflation. The state’s budgeted revenue estimates grew just shy of 9% in the same span, also well behind inflation.

The state’s final FY 2024 general revenue budget was 16.2% less than the FY 2019 general revenue budget after adjusting for inflation, according to a 2023 authored by senior policy analyst Sean O’Leary.

Because the state has income tax brackets in which tax rates increase as income increases, the across-the-board cuts from HB 2526 still overwhelmingly benefited the wealthy, O’Leary’s report concluded, with the top 20% of households receiving nearly two out of every three dollars in tax cuts.

“If you cut taxes so deep that it impacts your ability to provide high-quality public education or health care or infrastructure, that undermines the magnet that you’re trying to create to draw people and businesses, because people and businesses also want those things,� Allen said. “They want a healthy workforce. They want good schools. They want strong infrastructure.�

West Virginia spends less per capita than any state in the region on child care and development and also spends less than bordering states on Medicaid when considering per enrollee annual cost, according to a new released Thursday.

That report, authored by O’Leary and Allen, recommended adding new high-income tax brackets and rates and raising taxes on income above $100,000. The report estimated the move would raise $353 million annually in new revenue for the state while giving a tax cut to 60% of residents by adding a fully refundable earned income tax credit worth 25% of the federal credit, returning $648 on average to over 126,000 eligible households.

“There’s no conversation about raising revenue, which is also something that we could do,� Allen said. “We don’t only have to cut.�

Carrying the same ‘philosophical beliefs’

When asked about willingness to increase taxes on incomes over $100,000 at Friday’s Legislative Lookahead, state House of Delegates Finance Committee Vice Chair Clay Riley, R-Harrison, indicated the budget shortfall asserted by Morrisey’s administration doesn’t change his goal of “maintain[ing] the philosophical beliefs that we’ve carried from the past.�

“[O]ne of the things we’ve seen from this Legislature is we prioritize keeping money with the citizens of West Virginia,� Riley said.

Responding to the same question, Delegate Sean Hornbuckle, D-Cabell, leader of the Democratic super-minority of nine Democrats in the 100-member House, gave a very different answer.

“I think we’ve got to be truly reimaginative of the tax code and how we’re going to approach that,� Hornbuckle said.

Hornbuckle alluded to West Virginia’s favorable ranking when it comes to tax climate compared with neighboring states.

, a center-right tax policy nonprofit, ranked West Virginia’s state business tax climate better than any of its neighbors last year, and 22nd overall. The Tax Foundation ranked West Virginia 23rd in its 2025 state tax competitiveness index.

“And so the question is, why go further, right?� Hornbuckle said, arguing in favor of making sure middle-and low-income families “have more money in their pockets.�

‘We’ll need to see his budget’

House Speaker Roger Hanshaw, R-Clay, made it clear at Friday’s Legislative Lookahead that he’s not clear on how Morrisey’s administration arrived at its projection of a $400 million budget shortfall.

“I just don’t know. We’ll need to see his budget to know,� Hanshaw said, predicting lawmakers would be introduced to the budget at Morrisey’s State of the State address scheduled for Wednesday night.

But Hanshaw said the way legislators structured the budget each of the last four years leads them to believe the state is well-positioned for fiscal year 2026.

New state Treasurer Larry Pack, Justice’s Department of Revenue secretary and senior advisor from 2022 to 2024, downplayed the budget projection disconnect between Morrisey and legislative leaders at Friday’s Legislative Lookahead.

“I think it’s probably the difference between my wife doing our household budget and me doing our household budget,� Pack said. “Everybody’s got different definitions of wants and needs. Everybody looks at numbers and stuff differently.�

Morrisey’s office has not yet provided any documents responsive to a Jan. 22 Gazette-Mail Freedom of Information Act request for information that indicates the $400 million deficit for fiscal year 2026 projected by Morrisey during a Jan. 16 news conference.

Bleak budget outlook

But Hanshaw echoed Morrisey by painting a grim budget picture Friday, reporting a “substantial financial burden� with PEIA that he indicated would be cause for “asking what’s the proper structure and what’s the proper form for PEIA in West Virginia.�

Moments before prioritizing restructuring PEIA, Hanshaw noted the state still relies on natural resource severance taxes “in an outsized way� and that “we don’t know what that looks like for us now in the face of� what China said this week would be a 15% tariff on coal imported from the U.S. The tariff was a retaliation against a levy on Chinese products imposed by President Donald Trump.

State severance tax collections plummeted 59.1% to just under $398 million from fiscal years 2023 to 2024, according to state tax data, driven by an 86.2% drop in natural gas severance tax collections.

“The state’s going to have to think a little more innovatively about revenue generation in regard to that,� Workman said of the state’s severance tax decline.

But even as advocates of a sturdier social safety net in West Virginia search for budgetary room to breathe, Morrisey’s rhetoric points toward a tighter belt.

“The era of big spending is over,� Morrisey said at a Jan. 16 news conference. “The time for spending beyond our means is over.�