WEST VIRGINIA IN "DEATH SPIRAL" - Worst State For Business In 2017

(07/16/2017)

Bob Weaver/CNBC

CNBC's annual report puts West Virginia at the bottom of the 50 states, being the worst in business.

West Virginia has always been known as a place where people have to work incredibly hard in order to barely get by. But with the decline of the major source of that work — coal mining — the Mountain State has in many ways become an empty symbol.

Politically, most state politicos have made it a major priority to return coal to its former glory, coal taxes having been the source to fill state coffers for nearly 100 years, a dependence that has overshadowed efforts to diversify the economy.

The state scores a mere 942 out of 2,500 points, with the last-place economy, and finishing No. 49 for Workforce, Technology & Innovation and Business Friendliness.

The state did well for Cost of Doing Business, tying for the fourth lowest.

The state is 1 of only 7 whose economies shrank in 2016.

The decline in state GDP of 0.9 percent for the year was not the biggest in the nation, but West Virginia did not have much to lose. And according to U.S. Commerce Department statistics, it was almost entirely due to the decline in mining.

State government is in a quandary.

June revenue numbers are $18.7 million below estimate.

The final General Revenue Fund collection numbers for Fiscal Year 2017 were $120.7 million below original estimates. Several gap-filling measures, including taking $40.4 million from the Rainy Day Fund, effectively closed the revenue shortfall for the year.

The Governor’s chief of staff, Nick Casey, highlighted that the Legislature presumed there would be $11 million in surplus from FY17 to be used in the Fiscal Year 2018 which began on July 1.

There was no such surplus, but the $11 million was inserted in the state budget by the Legislature. Casey noted that the $11 million in hocus pocus money has to be made up from cost cuts somewhere such as fall trout stockings, volunteer firefighters, DHHR or fairs and festivals.

West Virginia produces roughly half the coal it did in 2008, according to a new report from West Virginia University's Bureau for Business and Economic Research.

The report predicts modest increases in production and overall stability over the next three years, followed by steady declines below 80 million tons per year through 2030 and beyond as natural gas continues to supplant coal as the major fuel source for power plants.

Production peaked at around 182 million tons in 1997 and for the most part has been declining ever since, according to the West Virginia Office of Miners' Health, Safety and Training.

Coal companies and politicians blamed the EPA, but economists say that demand for WV's type of coal has decreased, and cheap natural gas has climbed on the energy list.

More troubling in terms of West Virginia's competitive prospects are the job losses that have come with declining production — and increasing automation, with just a few thousand miners being left.

Also a contributing factor in the past 25 years, globalization and increased automation, pulling tens of thousands of jobs from the mountain state, everything from steel to small production plants.

Mining employment has leveled off lately, but despite President Trump's repeated promises to "put the miners back to work," and promises from Gov. Justice to do the same, the West Virginia University researchers predict coal-mining employment will resume its decline and continue to drop for the foreseeable future.

It is not just that the joblessness and despair are contributing to a serious drug problem — West Virginia has the highest overdose death rate in the nation, according to the Centers for Disease Control and Prevention — the problems in West Virginia's workforce go much deeper.

West Virginia workers are the least educated in the nation.

Fewer than 12 percent of residents over the age of 25 have a bachelor's degree, according to the U.S. Census Bureau.

The new state budget contains big cuts in higher education, including cuts of more than 6 percent at the state's largest public universities — West Virginia University and Marshall — and cuts of 4.6 percent at most community and technical colleges.

Republican state Senate President Mitch Carmichael argues that the budget cuts, which total $85 million, are a difficult but necessary first step toward financial stability for the state.

Meanwhile, the state ranks near the bottom for having real broadband, a venture that has promised the improvement of rural economies and the state has taken adverse positions against renewable energy industries, holding on to extractables.

West Virginia has joined other states with Walmart and fast food being the biggest employer, and is joining other states in reducing taxes, the theory that "trickle down" from the top will create jobs and improve wages.

So far, there is little evidence that it works.

Kids Count just released WV's rating for the well-being of children in the Mountain State:

- 45th of 50 states in education

- 42nd of 50 states in economic well being

- 43rd of 50 states in overall well being

- 36th of 50 states in health


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