Gov. Manchin is proposing a $4.3 billion budget for next fiscal year that holds the line on spending and includes no money for pay raises for school teachers or public employees.  Manchin presented his budget to lawmakers Wednesday night following his State of the State address.

Administration Deputy State Revenue Secretary Mark Muchow says the state faces the problems of the lingering effects of the recession combined with higher health care costs.  And the outlook for the coming years is even more grim. 

There "is just a lot of red ink," Muchow said.

The proposed budget, as required by law, is balanced for FY 2011, but only after using $68 million from a surplus from previous budget years and adding in millions of dollars in federal stimulus money.

But the years ahead under the Governor's six-year budget plan show deficits.

For example, expenses will be $192 million higher than revenues in FY 2012 and that will rise to $504 million in 2015 because of rising costs in health care for public employees and Medicaid. The state cannot run a deficit so state leaders will have to find ways to raise more revenue or reduce expenditures.

The recession has slowed stunted revenue growth in West Virginia in just about all areas:  Coal production is down; Car sales are off 11 percent; Personal income and business tax collections have declined; Unemployment continues to rise.

Muchow projects the state should be out of the recession by the middle of this year, but recovery will be slow.  FY 2011 will be the second year of declining revenue.

Still, West Virginia remains in better financial shape than most states.  There have been no layoffs, although the administration did recently cut the current budget by 3.4 percent. 

And the state has $542 million in a "Rainy Day" fund, but the Administration and legislative leaders want to save that money in case of an emergency.