West Virginia Budget: Tax Cut, Hope Scholarship, and Vetoes

West Virginia’s 2027 budget, signed by Governor Patrick Morrisey on March 13, 2026, sets $5.5 billion in general revenue spending and bundles a 5% personal income tax cut, full funding of the universal Hope Scholarship voucher program, a 3% pay raise for state employees and teachers, and $125 million in extra road money.¹² It also leaves the state with a projected $1.2 billion cumulative shortfall between FY 2028 and FY 2031 under the governor’s own six-year plan.³

Where the Money Goes

The $5.5 billion general revenue figure is a slight increase over the FY 2026 estimate of roughly $5.3 billion.⁴ Senate Bill 250 passed the House on March 6, 2026, and the governor signed it a week later with 12 line-item vetoes.⁵

Major items in the final package:

$276 million to fully fund the Hope Scholarship voucher program.²
$125 million in additional road repair and paving money.²
A 3% pay raise for state employees, public school teachers, school service personnel, State Police, and highway workers.¹
First-time full funding of the higher education funding formula, plus $72 million for capital and deferred maintenance at WVU and Marshall medical and dental schools.²
$30 million for water and sewer projects through the Infrastructure and Jobs Development Council.²
Nearly $40 million above current levels for adoption and foster care, including the “Bring Them Home” initiative.⁵
$5 million for the Flood Resiliency Trust Fund.¹

The Income Tax Cut and What You’ll Save

The budget drops the top personal income tax rate from 4.82% to 4.58%, a 5% rate reduction expected to cut state revenue by about $125 million a year.⁶⁷ Morrisey had asked for a 10% cut costing roughly $250 million; the House Finance Committee had originally rejected any cut at all. The 5% figure split the difference.⁸

What that works out to in your pocket depends on your income. The West Virginia Center on Budget and Policy estimates 80% of residents will save between $4 and $144.50 a year, while the top 1% of earners will save about $2,300. The center calculates that 65% of the total benefit goes to the top 20% of earners.⁷⁹ An amendment from Delegate Sean Hornbuckle that would have aimed the relief at households earning $75,000 or less failed 15-80.

Hope Scholarship Goes Universal

The Hope Scholarship, which lets families use public funds for private school tuition or homeschooling expenses, is now open to every child in the state. The program will receive close to $300 million in total FY 2027 funding, though less than half comes from general revenue; the rest is one-time supplemental money, surplus dollars, and carryover.⁹ Each student is eligible for $5,435.62.¹⁰

Demand is climbing fast. As of June 2026, more than 26,600 students had applied for the 2026-2027 school year, up from 15,000 approved the prior year.¹¹ The program cost roughly $110 million in FY 2026 and was projected to triple, making it the fastest-growing line in the budget.¹² The House Finance Committee weighed capping growth during the session but backed off after homeschool families pushed back.⁷

What Public Schools Got

Public school aid moved the other way. The school aid formula received about $8 million less than the current budget.¹³ A proposal from Delegate Joe Ellington to raise per-student funding to $6,500 with tiered rates for special education never got a vote.⁷

The Senate considered an $8 million increase for special education students in the most intensive service tiers. State School Board President Paul Hardesty called that figure insufficient against what he described as “a $224 million problem” and dismissed the measure as “lipstick on a pig.” The proposed increase would have reached only about 4,362 of the state’s 51,522 special needs students.¹⁴ West Virginia spends nearly $900 less per student than the national average, and 34 school districts fall below national spending levels.¹⁵ Hancock, Kanawha, and Cabell counties were already weighing school closures and layoffs tied to enrollment losses and tight budgets.¹³

Medicaid and PEIA

Medicaid covers more than 500,000 West Virginians and is the single largest driver of state spending; the Department of Human Services accounts for roughly 41% of recommended expenditures.³ The governor says Medicaid is fully funded. The West Virginia Center on Budget and Policy counters that general revenue appropriations for Medicaid were cut by $107.1 million from the governor’s own proposal, with $46.1 million of that gap backfilled by leaning harder on the Health Care Provider Tax.⁹ A separate analysis found Medicaid was underfunded by about $83 million, with legislators planning to close part of the gap through additional legislation and the transfer of $31 million in unspent funds.¹³

That provider tax backstop is on borrowed time. The federal “One Big Beautiful Bill Act” mandates a phase-down of provider tax rates, projected to reduce West Virginia’s collections by $36 million in FY 2027 and $178 million by FY 2031. Because the state receives roughly $3 in federal match for every $1 of state Medicaid spending, each dollar of lost provider tax money translates into a four-dollar reduction in total program funding unless general revenue picks up the slack.¹⁶

For state workers and retirees on PEIA, the budget caps premium increases at 3% in aggregate.² PEIA officials have framed small annual increases as a way to avoid the sharp spikes that followed the 2018-2022 rate freeze. Rising healthcare costs, including GLP-1 drug spending, continue to pressure the program.¹⁷

Water, Flood, and Road Funding

Water and sewer deficiencies statewide are estimated to cost between $16 billion and $20 billion to address, with southern coalfield counties alone needing close to $300 million.⁷ The budget puts $30 million into the Infrastructure and Jobs Development Council, plus $76 million for the broader West Virginia Infrastructure Council from lottery and surplus funds.² A $250 million plan for southern coalfield water lines was never introduced in the House. A $10 million measure Delegate Adam Vance tried to force to the floor cleared a discharge vote 52-41 but then died 46-47 when it fell short of the four-fifths needed to suspend constitutional reading rules.

Flood preparedness followed a similar pattern. The House initially put $25 million into the Flood Resiliency Office Trust Fund, created in 2023 and never previously funded. The Senate cut that to $5 million in the final version.¹⁸

On roads, the extra $125 million supports more than 350 projects covering more than 580 miles of paving. Department of Transportation Secretary Stephen T. Rumbaugh said the money is going to slip repairs, potholes, and spring paving to address damage from a harsh winter.¹⁹

Foster Care and “Bring Them Home”

West Virginia has been spending more than $62 million a year to house nearly 400 foster children in out-of-state group homes and psychiatric facilities in states including California, Florida, Texas, and Utah.²⁰ The “Bring Them Home” initiative, backed by a $6 million seed fund in House Bill 4021, is meant to renovate state-owned buildings into in-state beds for children needing acute mental and behavioral health care. The Department of Human Services has identified five or six potential sites, including vacant facilities at Greenacres in Lesage and Darby Farm.²¹

The Governor’s Line-Item Vetoes

Morrisey used 12 line-item vetoes when signing SB 250. Some were cleanup for drafting errors and outdated agency names. The substantive changes:

Court Appointed Special Advocates (CASA) was reduced by $400,000, leaving $700,000.²²
A $1 million directed transfer from the Elevator Safety Fund was vetoed entirely; the governor said the transfer would deplete the fund and shut the program down.²²
The Marshall University Research Corporation appropriation was cut from $1 million to $500,000.²²
International Trade Offices funding was reduced from $1 million to $750,000.²²
A cap limiting interdepartmental transfers to 5% of general revenue was struck as overly restrictive.²²

Because Morrisey signed the bill before the session ended on March 14, lawmakers had the chance to consider overriding any veto.

The Shortfall Coming Next

West Virginia starts FY 2027 with substantial reserves. As of December 2025, Rainy Day Fund Part A held $788.7 million and Part B held $633 million, together equal to roughly 26% of FY 2026 appropriations.⁴ Revenue is less reassuring. The state leans heavily on severance taxes from coal and natural gas, which swing with energy prices. Through the first seven months of FY 2026, severance collections ran 7.7% below estimates, and January 2026 came in nearly 40% below its monthly target.²³

The governor’s own six-year financial plan shows expenditures outpacing revenue starting in FY 2028, with annual gaps of roughly $204 million in FY 2028, $301 million in FY 2029, $284 million in FY 2030, and $412 million in FY 2031. Those projections assume no growth at all in Hope Scholarship or Medicaid costs, both of which have been rising.³ The West Virginia Center on Budget and Policy argues that had the governor’s full 10% tax cut gone through, the four-year gap would have reached $1.7 billion.²⁴

The budget plan itself warns that any surplus in coming years should be held back for future shortfalls rather than used to add new ongoing commitments.³ The West Virginia Center on Budget and Policy, a nonpartisan research group, offered a broader critique, arguing that “tax cuts and the growing cost of the Hope Scholarship once again crowd out new investments and much-needed funding increases for existing public services.” The center noted that inflation-adjusted general revenue spending is down nearly $290 million compared to FY 2019, flagged an almost $225 million special education shortfall identified by the state Department of Education, and pointed to a $10 million food bank program that went unfunded for a second consecutive year. By the center’s math, capping Hope Scholarship spending at $100 million would have covered about 90% of the special education shortfall.⁹

1
WV Public Broadcasting. Morrisey Signs State Budget With a Dozen Changes
2
Governor of West Virginia. Governor Morrisey Highlights Key Investments Secured in Final Budget
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West Virginia Budget Office. FY 2027 Executive Budget Report
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NASBO. West Virginia Budget
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West Virginia Legislature. Budget Passes House of Delegates
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Thomson Reuters Tax. West Virginia Cuts Personal Income Tax Rates
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Mountain State Spotlight. West Virginia 2026 Budget
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West Virginia Watch. WV Lawmakers Approve Tax Cut, Teacher Pay Raise
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WV Center on Budget and Policy. FY 2027 Budget Recap
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West Virginia State Treasurer. Treasurer Pack Announces Hope Scholarship Applications Surpass 20,000
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West Virginia Watch. More Than 20,000 WV Students Apply for Hope Scholarship
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WV Center on Budget and Policy. FY 2026 Final Budget Still Reliant on One-Time Funds
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Mountain State Spotlight. Four Budget Takeaways
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West Virginia Watch. WV Senators Axe Most School Funding Formula Changes
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WV Center on Budget and Policy. West Virginia Center on Budget and Policy
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WV Center on Budget and Policy. The Big Beautiful Bill Is a Big Problem for West Virginia’s Budget
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West Virginia Watch. PEIA Finance Board Proposes Premium Increases for Fiscal Year 2027
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West Virginia Watch. WV House Budget Says No to Governor’s Tax Cut, Yes to Hope Scholarship, Flood Prevention
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West Virginia Watch. Morrisey Highlights Investment in Roads, Promises Quick Pothole Paving
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West Virginia Watch. West Virginia Spends $62M Sending Foster Kids Out of State
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WV MetroNews. Lawmakers Consider Bill to Return Out-of-State Foster Children
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WV MetroNews. Governor Signs $5.5 Billion Budget
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Weirton Daily Times. Lower Personal Income Tax, Severance Tax Collections Bring Down January Revenues
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WV Center on Budget and Policy. Governor’s FY 2027 Budget Overview