CHARLESTON — Despite former governor Jim Justice promising to not leave his predecessor a hole in the next fiscal year budget, Gov. Patrick Morrisey said that current projections show a $400 million budget hole for fiscal year 2026.

Holding his second in-person press conference of the week Thursday in the Governor’s Reception Room of the State Capitol Building, Morrisey said that as of his first day in office Monday, the general revenue budget for fiscal year 2026 — beginning July 1, 2025, and ending June 20, 2026 — is key.

“We’re going to focus on the budget. It’s one of the most important priorities for any governor and for the state,” Morrisey said. “…The state will have a projected deficit of approximately $400 million. And that number is projected to rise more and more in the out years. This is where we stand on day one.”

Morrisey, Department of Revenue Secretary Eric Nelson, and Director of Budget Mike McKown have less than 30 days to work on the fiscal 2026 budget bill and present it to the West Virginia Legislature on Wednesday, Feb. 12, when lawmakers gavel in for the 2025 legislative session. But Morrisey presented an optimistic view, saying that he was committed to looking at all options to present a balanced budget.

“I am looking at the entirety of the budget, and I want to put West Virginia first, and that means setting priorities that are going to help our state grow to make sure that we have an improved standard of living, that our kids have the best possible education, and we’re meeting the demands and functions of state government,” Morrisey said.

Morrisey stressed that the projected budget deficit for fiscal year 2026 does not affect the current fiscal year, which still has less than six months remaining until it ends on June 30 of this year. Previous revenue officials under Justice — who now is serving in the U.S. Senate — estimate that the state will end fiscal year 2025 with approximately $80 million above projections.

Fiscal year-to-date tax collections as of the end of December 2024 of $2.67 billion were 1.58% more than the $2.63 billion revenue estimate, resulting in a $41.7 million surplus six months into the current fiscal year.

Morrisey placed the blame for the projected future budget deficit on a heavy reliance on one-time tax revenues paying for ongoing budget obligations.

“We believe that there’s a structural deficit that’s built into the baseline,” Morrisey said. “We see that there’s been a heavy reliance on one-shot revenue paying for ongoing obligations. … From our perspective, this is a big part of the whole structural problem with the budget that we’re going to begin to address.”

Also contributing to the projected budget hole is increased educational costs, such as when the Hope Scholarship educational voucher program officially expands to all public, private, and homeschool students in 2026; and increased costs for the state’s share of the Public Employees Insurance Agency, which shares 80% of the cost.

During a Dec. 3 virtual briefing, Justice said the general revenue budget that would be handed off to Morrisey would have no holes that require either budget cuts or tax increases to fill. However, he said that was depending on any future changes to the budget by Morrisey or the Legislature.

“For all I know, we do not have a hole for (fiscal year) 2026 at all,” Justice said. “The next budget will surely depend on decisions that are made by the next folks that come in and the Legislature and on and on and on.”

The Morrisey administration is already implementing several changes that could result in narrowing the projected budget hole for fiscal year 2026. These include executive orders issued Tuesday requiring all state departments and agencies to review expenditures of $100,000 or more retroactive to July 1, 2024; and ordering agencies to identify areas of wasteful spending or inefficiencies.

Morrisey also announced Thursday that the departments of Commerce and Economic Development — split by Justice and the Legislature into two in 2021 — will merge back into one Department of Commerce; while the Department of Arts, Culture and History will merge into the Department of Tourism. These mergers will have to be approved by the Legislature before happening.

“I remain very optimistic that despite a lot of the big spending that’s occurred, West Virginia is going to be that shining state in the mountains,” Morrisey said.

“I know that we’re going to have an opportunity to develop policies that grow and help our budget and help ensure that our citizens have a higher standard of living, and we can afford the right tools to lift up educational attainment,” Morrisey continued. “But I also want to be honest with you and set the stage as to where we are on Jan. 13, 2025. We’ve obviously already taken some steps to begin tightening the belts and have areas for reduced spending.”