Experts predict growth in WV economy - Business, Government Legal News from throughout WV

Experts predict growth in WV economy

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Although the state's budget for the next fiscal year shows no revenue growth and no surplus, experts from both government and education say things will get better.

Paul Speaker, an associate professor of finance in West Virginia University's College of Business and Economics, told lawmakers during a Feb. 13 meeting that the state's demographics contribute to the overall economy. For instance, West Virginia ranks third in the nation for oldest population relative to the median age and second oldest in terms of individuals aged 65 or older. This aging population demands certain things from the economy, Speaker said, such as health care and financial services. Both of those sectors are expected to grow over the next five years.

"We've had very steady growth in the health care sector in terms of jobs," Speaker said, nothing the sector grows at about 2 percent annually. That trend is expected to continue.

"We will have to take care of an older population," he added. "There will be more health care costs. We do have problems that need attention and treating those … it does mean there are more jobs. So whether you consider the good news or bad news on that one, they're both there."

Health care jobs typically may more than the median wage, and wage growth also is projected. Speaker said additional health care jobs are anticipated to take gross state product from its current 9.12 percent to 9.66 percent by 2017.

But the health care situation isn't an overall pretty picture. State officials have long projected rising Medicaid costs and a decrease in the federal match rate. In anticipation of the rising cots, Gov. Earl Ray Tomblin last year asked state agencies to cut 7.5 percent from their budgets. According to Mark Muchow of the Department of Revenue, the debate surrounding Medicaid funding will continue to hound state government until a solution is found.

One problem with Medicaid, Muchow said, is West Virginia has closed the gap in terms of per capita income. While that's an overall positive thing, it does affect how much federal money the state's Medicaid program receives. Every state is guaranteed a 50 percent match rate, he said. The match rate at one point was higher than 80 percent; that has since declined to about 71 percent. Each time the match rate drops a percent, it costs the state about $30 million.

The overall growth rate for Medicaid, Muchow said, is 5.5 percent while the average long-term growth of the state's general revenue fund is 3.5 percent. But that's a problem states across the country are experiencing. Medicaid grows faster than the economy, Muchow said.

Another way the state can help the aging population is by expanding the professional business services sector, primarily financial services. Workers need help planning retirement, and seniors especially could use similar services, Speaker said.

"This is going to be an important part of our economy for the next several years," he said. We are underserved relative to the rest of the nation."

While that presents a problem now, it's an opportunity for the future because students will be looking at what jobs are available and what degrees to get, he said.

  Muchow is expecting growth this year, albeit slow. That's a nationwide phenomenon, though, he pointed out. Nationally, 2013 won't be as good of a year as 2012, and some of that slow down in growth is attributed to the federal budget negotiations, the end of the payroll tax cut holiday and other tax increases.

However, Muchow said inflation shouldn't be a worry. He expects inflation to remain fairly tame and the Federal Reserve is working to keep interest rates low through the next couple of years. Consumption is in line with growth in income, Muchow said. Payroll and employment are slowly growing, he said, but that's still growth.

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