Fussy Math WV Style

The Governor’s administration developed an estimation of future state budgets to eventually conclude that deficits would occur by 2008. If we assume the math is correct, then that must mean they intend to spend much more money than currently expected in revenues over the same period.What happened to the surpluses? The surpluses are consumed by additional spending is the only explanation.

The estimates have budgetary spending going from $3.3 Billion in FY 2005-2006 to $4.2 Billion in FY 2010-2011. Revenues don’t increase at the same rate according to their estimates, but spending continues to out pace revenues in each year.

Here is what it looks like:

W.Va. Budget Year Base Budget Surplus/Deficit
FY 2005-06 $3,365,297 $337,901
FY 2006-07 $3,445,743 $258,355
FY 2007-08 $3,625,395 $77,543
FY 2008-09 $3,835,407 ($60,872)
FY 2009-10 $4,043,222 ($125,303)
FY 2010-11 $4,269,403 ($279,543)
Dollar amounts are in thousands

Nobody knows what parameters where used to develop this prediction. The information provided raises more questions than it answers, but one thing seems simple: If you can predict a budget deficit this far in advance, then you have plenty of time to do something about it. If you can’t raise revenues at the same pace as spending, you only have two choices; Raise taxes or curb spending. The citizens and businesses in this state are already over taxed so curtailments in spending should be on the agenda. Unless you can find a way to raise revenue by stimulating businesses to grow and create jobs, there seems to be little other we can do. Tax increases should not be acceptable and neither should a $280 million budget deficit by 2010.

Natural Gas Price Concealed

The recent natural gas price increases are destined to get worse. Here is why. The Public Service Commission approved rate increases that don’t allow some utilities to fully recover their gas purchase costs. Example: Let’s say the PSC approves a rate of $10/mcf and the gas company has to purchase gas at the market price of $12/mcf. Then the gas company bills customers at the approved rate of $10/mcf and puts the balance of $2/mcf on the books to be recovered in future rate cases. Now the utility is entitled to a rate of return on this investment and possibly interest. This strategy will work only if gas prices move down sharply. If gas moves up in price, the customer will have to bear the cost of then current price increases plus the cost of the under recovered amount from the previous period. In this example, the result is additional 20% increase in addition to the period increase.

When this happens, the public will blame the utility for doing what it was ordered to do by the PSC over utility objections. We should pay as we go so there are no surprises.

If prices go up as expected, consumers are in for a shock as a result of the PSC concealing the real price.